India Bonds Added to Bloomberg EM Index: Lower Borrowing Costs

New Delhi, Mar 5 (PTI) Bloomberg on Tuesday announced the inclusion of Indian G-Securities in its Emerging Market (EM) Local Currency Government Index and related indices from January 31 next year, a move that will bring down borrowing costs for the government.

Indian Fully Accessible Route (FAR) bonds will be included in the Bloomberg EM Local Currency Government indices with an initial weight of 10 per cent of their full market value on January 31, 2025, Bloomberg said in a statement.

The weight of FAR bonds will be increased in increments of 10 per cent of their full market value every month over the 10 months ending October 2025, at which point they will be weighted at their full market value in the indices, it added.

The indices in scope for inclusion include the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10 per cent Country Capped Index, and all related sub-indices, it said.

In her Budget speech for 2020-21, Finance Minister Nirmala Sitharaman said, "Certain specified categories of government securities would be opened fully for non-resident investors, apart from being available to domestic investors as well". The specified securities, which will be listed on the indices, will not have a lock-in requirement.

Once completely phased into the Bloomberg Emerging Market 10 per cent Country Capped Index, India is expected to join both China and South Korea as markets that reach the 10 per cent cap.

Within the market cap weighted version of the index, India is expected to be the third largest country after China and South Korea, it said.

Using data as of January 31, 2024, the index would include 34 Indian securities and represent 7.26 per cent of a USD 6.18 trillion index on a market value-weighted basis, it added.

"This is an important marker in the development of India's financial markets and a reflection of India's growing importance to the global economy," Bloomberg LP founder Michael R Bloomberg said.

India's continued emergence as a global financial centre promises to be one of the most significant economic developments of this decade, and Bloomberg is committed to bolstering it by connecting more investors to India, he noted.

"The Indian economy is on a steady growth trajectory and the inclusion of Indian FAR Bonds in our Emerging Market Local Currency Government Index marks a key milestone amidst the measures India has taken to open its bond markets.

"Bloomberg Indices is committed to serving the global investment community and this development will increase access to, and participation in, Indian markets," said Nick Gendron, Global Head of Fixed Income Index Product, Bloomberg Index Services Limited (BISL).

The decision to include India FAR Bonds in the Bloomberg EM Local Currency Government Index was taken after an extensive consultation to solicit feedback from market participants and stakeholders.

As per the estimates, the inclusion is going to attract about USD 40 billion in foreign funds into the G-Secs market over the next 2 years.