Central Idea

In a groundbreaking development, JPMorgan has announced the inclusion of Indian government bonds in its Government Bond Index-Emerging Markets (GBI-EM), slated to commence from June 2024.
This decision could pave the way for substantial inflows of billions of dollars into local currency-denominated government debt.

What is Government Bond Index-Emerging Markets (GBI-EM)?

Definition	An index that tracks the performance of government bonds issued by emerging market countries. It reflects the returns of local-currency-denominated sovereign bonds.
Purpose	To provide a benchmark for measuring the performance of emerging market government bonds, helping investors assess the attractiveness of these bonds for investment.
Issuer	J.P. Morgan
Components	Includes government bonds issued by various emerging market countries. The composition may change over time based on eligibility criteria.
Coverage	Covers a broad range of emerging market countries and their local currency government bonds. Different GBI-EM indices may have specific regional or maturity focuses.
Currency	Denominated in the local currencies of the respective emerging market countries.

Long-Awaited Discussion: India’s consideration for inclusion in global indexes began in 2013. However, limitations on foreign investments in domestic debt impeded progress.
Fully Accessible Route (FAR): In April 2020, the Reserve Bank of India introduced select securities exempt from foreign investment restrictions through the “fully accessible route” (FAR), rendering them eligible for inclusion in global indexes.
Index-Eligible Bonds: Currently, there are 23 Indian Government Bonds (IGBs) with a combined notional value of $330 billion that meet index eligibility criteria, according to JPMorgan.
Investor Support: Approximately 73% of benchmarked investors voted in favor of India’s inclusion in the index, marking a significant endorsement.