InvestorQ : Why have Indian bonds taken so long to be included in the indices?
Katherine Gonsalves made post

Why have Indian bonds taken so long to be included in the indices?

rhea Babu answered.
2 months ago

If India is such a broad and deep market for bonds, why is it still not in the global indices, when smaller countries are already part of it. Some problems were procedural in nature while others pertained to taxation. Procedurally, the key issue was maintenance of 3% margin deposit, which distorted the costs. That is scrapped. Government has refused tax concessions for foreign investors on income from these bonds. That should not be a major roadblock considering that real yields and on Indian debt, as also post-tax yields on Indian bonds are extremely attractive. This is true in rupee and dollar terms.

The real reason is that government must push for it. For too long, the government has been worried about the risk of rapid outflows by passive funds, like what happened in 2013. However, with $570 billion in forex reserves, this should not be a major risk. The current account deficit is likely to be above 4% of GDP in FY23 and it is in this situation that the steady bond flow will help stabilize rupee. India has to make an aggressive push, otherwise this may take longer.