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Explaining Debt Market and Bloomberg EM Index Inclusion



  Jan 10, 2024

Explaining Debt Market and Bloomberg EM Index Inclusion



1. What is Happening with India's Debt Market?

India is set to be included in the Bloomberg Emerging Market (EM) Index, which is expected to attract more foreign investments into the country’s debt market in 2024.

2. What is the Bloomberg EM Index?

It's an index that tracks the performance of local currency bonds from emerging markets. Inclusion in this index makes a country's bonds more visible and attractive to international investors.

3. Impact of Inclusion in the Index:

This inclusion is anticipated to boost foreign portfolio investments (FPIs) in Indian government bonds, following a trend of increased investments seen in 2023.

4. What is the G-Sec Fully Accessible Route (FAR)?

The G-Sec FAR is a window that allows foreign investors to purchase Indian government bonds without many restrictions, facilitating easier investment.

5. Expected Inflows from FPIs:

Inclusion in the Bloomberg EM Index could generate inflows of $2-3 billion, which, though modest, is seen as positive for the Indian debt market.

6. Potential Impact on India’s Economy:

This move is expected to support the government’s increased debt issuances and could help balance fiscal responsibilities with infrastructure needs.

7. How Does This Affect the Rupee?

there will be global demand for rupee. Anticipation of more foreign inflows might lead authorities to maintain a stable and predictable path for the Indian rupee.

8. When is the Inclusion Scheduled?

The inclusion will be phased over five months starting September, with the initial process beginning in June.

9. What Does This Mean for India's Growth?

Optimism over India's growth prospects, combined with expected U.S. rate cuts, makes Indian government bonds attractive to foreign investors.

In simple terms, India’s upcoming inclusion in the Bloomberg EM Index is a positive development for its debt market, likely to attract more foreign investment and support economic growth.

SRIRAM’s


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