Chief Financial Advisor on inclusion of Indian bonds in the JPMorgan Index

He said there is potential for currency appreciation after inclusion of Indian bonds in the JP Morgan index

New Delhi:

Chief economic adviser V Anantha Nageswaran said on Friday that the inclusion of Indian government bonds in JPMorgan’s benchmark emerging market index from next year will broaden the investor base and could lead to an appreciation of the rupee.

He also said there is potential for currency appreciation following the inclusion of Indian bonds in the JPMorgan index.

Global financial firm JPMorgan has said it plans to include Indian government bonds, or government securities (G-Secs), in its benchmark emerging market index from June 2024, a move that will bring down borrowing costs for the government.

The inclusion of G-Secs will be staggered over a 10-month period from June 28, 2024 to March 31, 2025, indicating a one percent increase in its index weight.

“Obviously, the investor base for Indian government bonds is expanding, and it’s also kind of relieving the Indian financial institutions from having to be one of the biggest buyers or underwriters of government bonds, and they can actually then lend that money for more productive purposes. to the private sector, commercial sector individuals etc,” Nageswaran said.

He said there will be a tendency for the currency to appreciate, just as it happened between 2003 and 2008 when capital inflows into India increased.

“There is a demand for investors to buy the Indian government bonds… so in that sense there is a potential for currency appreciation when the index inclusion starts to happen or the demand from investors for the Indian government securities starts to increase,” he said.

In her Budget speech for 2020-21, Union Finance Minister Nirmala Sitharaman said, “Certain specified categories of government securities will be opened up fully to non-resident investors, apart from being available to domestic investors as well.”

The listed securities that will be listed on the indices will not have a binding requirement.

This was long overdue and there were certain issues, including with regard to taxation, which the government has resolved in the last several months.

(With the exception of the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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