India is reportedly preparing a fresh push to secure inclusion of its sovereign debt in some of the world’s most influential bond benchmarks, including the Bloomberg Global Aggregate Index, after unveiling a series of measures aimed at making the country’s debt market more attractive to foreign investors.
According to an Economic Times report, officials from the Reserve Bank of India (RBI) and the finance ministry are expected to engage with global bond index providers and may also initiate discussions with the Basel-based Bank for International Settlements (BIS), a major investor in government securities. The BIS was recently granted special tax-exempt status as part of a broader policy overhaul designed to improve India’s appeal to overseas investors.
Moneycontrol could not independently verify the report.
The government’s latest reforms include scrapping the 12.5 percent long-term capital gains tax and the 20 percent withholding tax that foreign portfolio investors (FPIs) previously paid on investments in government securities, states the report. Authorities have also significantly expanded the pool of bonds available under the Fully Accessible Route by including 15-year, 30-year and 40-year government securities, along with sovereign green bonds.
As per officials cited in the report, the measures address key concerns previously flagged by global index providers, including tax treatment, market access and settlement infrastructure. “Major concerns have been considerably addressed,” one official told the newspaper, while another said regular engagement with index operators would continue.
Market participants estimate the latest changes could attract between $7 billion and $11 billion in fresh foreign inflows, with around $5 billion potentially entering Indian government bonds even before any formal index inclusion.
Head of markets for India and South Asia at Standard Chartered Bank, said the tax exemptions make Indian sovereign bonds significantly more attractive and strengthen the country’s case for inclusion in the Bloomberg Global Aggregate Index, particularly if the securities become eligible for Euroclear settlement.
India already features in JPMorgan’s Emerging Markets Bond Index, Bloomberg’s EM Local Currency Government Index and the FTSE Russell Emerging Market Index. However, Bloomberg deferred India’s inclusion in its flagship Global Aggregate Index earlier this year, citing operational and market infrastructure challenges.
Inclusion in the benchmark could unlock billions of dollars in passive foreign investment, lower government borrowing costs, deepen the domestic bond market and provide support to the rupee.
Source from: https://www.moneycontrol.com/news/business/after-tax-overhaul-india-makes-fresh-pitch-for-entry-into-top-global-bond-indices-report-13943379.html
