JP Morgan move to include India in emerging market index

In a significant boost to the Indian economy and the country’s global positioning, India is all set to enter the elite club of JP Morgan’s GBI-EM Global index suite, commencing from 28 June, 2024

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Currently, there are 23 Indian Government bonds (IGBs) which are eligible for inclusion -- in the widely tracked emerging market debt index -- with a combined notional value of USD 330 billion, as per the JP Morgan statement which also highlights that inclusion of the IGBs will be staggered over a 10-month period starting 28 June, 2024, through 31 March, 2025. Thus, in effect, there will be an incremental addition of 1 per cent weightage per month for these Indian bonds in the index.

The GBI-EM GD accounts for USD 213 billion of the estimated USD 236 billion benchmarked to the GBI-EM family of indices, the JP Morgan statement adds. According to JP Morgan, India is expected to reach the maximum weight of 10 per cent in the GBI-EM Global Diversified Index (GBIEM GD). Following the JPM announcement, spot USD/ INR opened around 31 basis points lower and has since retraced higher by 11 bp, according to market record. While Secretary, Department of Economic Affairs Ajay Seth has welcomed it as a “development showing confidence in the Indian economy,” Chief Economic Adviser V. Anantha Nageswaran underlines the confidence emanating from the fact that “JP Morgan has made this decision on their own”. Nageswaran views it as an attestation of the confidence that financial market participants and financial markets, in general, have on India’s potential and growth prospects and its macroeconomic and fiscal policies. “Just as long-term equity investors have been amply rewarded by investing in Indian markets, so will long-term investors in Indian government bonds be,” says Nageswaran.