FTSE Russell defers India’s inclusion from government bond index By Reuters

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It is Dharamraj Dhutia

MUMBAI (Reuters) – Global index provider Russell will suspend India’s inclusion in its government listings due to tax, registration and debt issues, as two other index providers announced their inclusion, it said on Thursday.

However, it acknowledged progress in the availability of securities in its March review of the FTSE Emerging Markets Government Bond Index (EMGBI), adding that the bonds would remain on its watch list.

It also said that India has made progress with some of the changes being made to financial management, which have been well received and have helped improve some of the trade solutions.

However, factors such as “written documents to meet the registration of foreign investors, increased reporting, long settlement periods and tax deductions” prevent the qualification of the bonds at “Market Accessibility Level of 1”, FTSE said.

The issuer said it will continue discussions with the Reserve Bank of India and seek feedback from a group of countries that are participating in the bond market on what they are doing in their sales.

The development comes after JPMorgan and Bloomberg Index Services announced the inclusion of Indian government securities in their emerging markets from June 2024 and January 2025 respectively.

Indian bonds have seen foreign inflows of nearly $10 billion in the past six months.

Joining the FTSE index is also expected to increase investment in funds and index-linked funds, although market participants did not see such a move happening immediately.

Analysts estimate that India’s inclusion in the JPMorgan index will bring in about $23 billion, while the Bloomberg index is expected to attract as much as $3 billion from indexers.

“The FTSE has very strong policies, and the volume of inflows is not very high, so the market will not react, especially at a time when there are many other triggers,” said VRC Reddy, chief economist at Karur. Vysya Bank.

India has been on the watch list since March 2021, when the FTSE delayed its inclusion in its September review, saying that the emerging markets that showed foreign investment remained unchanged.

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