India inches towards inclusion in big bond indices

AWAVE OF passive capital flows is the handsome prize for countries that secure a place in major bond indices. That prospect seems to be on the horizon for India. Many analysts expect part of its government-bond market to enter indices compiled by Bloomberg, a data provider, and JPMorgan Chase, a bank, as early as next year, or perhaps 2023. The government has been keen on inclusion even as it has been ambivalent about other types of capital flows. Its cautious approach is increasingly in line with economists’ shifting attitudes.The flows that inclusion in major bond indices tend to generate are one of the least objectionable forms of international investment. They tend to come from massive, slow-moving funds—the opposite of the flighty hot-money flows that emerging-market policymakers fear. That might be why index inclusion has been a priority for India’s finance ministry. Until last year a cap of 6% on the foreign ownership of government bonds had been the main factor preventing India’s inclusion in the big bond indices. Then officials introduced a “fully accessible route” for overseas investors, which lifts the foreign-ownership limit on some bonds.