India’s Inclusion in JPMorgan’s Emerging Market Debt Index: A Gateway to Increased Investment

India’s Inclusion in JPMorgan’s Emerging Market Debt Index: A Gateway to Increased Investment

Ira Singh
24 Sep’23

In a significant development for India’s financial markets, JPMorgan Chase & Co. has announced the inclusion of India in its coveted Emerging Market Debt Index. This decision by the global financial giant marks a milestone for the Indian economy, as it paves the way for higher inflows of foreign capital, potentially propelling the nation’s debt market to new heights.

In a highly anticipated move that could potentially bring in billions of dollars in foreign investment, JPMorgan Chase & Co. will include Indian government bonds in its benchmark emerging-market index, according to a report by Bloomberg.

The securities will be included in the JPMorgan Government Bond Index-Emerging Markets by the index provider as of June 28, 2024. According to a statement released on Thursday, India would only count up to 10 per cent of the index.

Index inclusion comes after “the Indian government’s introduction of the FAR programme in 2020 and substantive market reforms for aiding foreign portfolio investments,” according to a team led by Gloria Kim, the company’s global head of index research as cited by Bloomberg. India’s inclusion in the index was supported, according to the survey of nearly 75 per cent of the benchmark investors.

The inclusion of India in a significant global index will increase access for international investors to the largest economy in the world with the fastest rate of growth and some of the greatest rates of return. HSBC Holdings Plc.Claims that as much as $30 billion inflows might result from the inclusion.

India’s potential inclusion in global benchmarks has been anticipated more and more recently as index providers seek to branch out on the index constituents. Indexes had fallen following the Russia-Ukraine war, while China’s deteriorating economic problems have dulled the country’s national debt.

India is now the final important upcoming market in the world to not have joined other nations like China on the global debt indexes.

The Indian government has mostly refused to modify its tax laws in a way that would facilitate the inclusion of the securities in international indexes. Another significant market in development, South Korea, agreed to let Euroclear Bank SA open a collection account, allowing for easier access for foreigners.However, JPMorgan reported in March that support for including India’s high-
yielding, index-eligible government bonds had increased to 60 per cent in its survey, up from 50 per cent the year before.

According to data from Clearing Corp. of India, foreign investors increased their holdings of these bonds to roughly $12 billion from $7.4 billion at the end of 2022 while awaiting news on inclusion.

Another significant index provider, FTSE Russell, has maintained India’s bonds under analysis for admission in its emerging market index in its most recent assessment this month and is currently meeting to discuss whether to include India in international bond indexes, according to sources.