India’s Inclusion in JP Morgan Bond Index Promises Cheaper Funding

(Bloomberg) – Indian companies are likely to find it cheaper to raise funds following the inclusion of the country’s sovereign bonds in the JPMorgan Emerging Markets Index, as reported by Bloomberg.

Kaustubh Kulkarni, a senior country officer for India and vice-chair for Asia Pacific at the Wall Street bank, explained that as foreign investors increase their share in Indian government bonds, domestic investors can concentrate more on broader debt issuances from Indian companies. This shift could help reduce the cost of corporate fundraising.

JP Morgan anticipates that global investments will increase by $20 billion to $25 billion over the next 10 months, boosting foreign ownership from the current 2.5% to 4.4%. This inclusion could potentially open up a $1.3 trillion market to a wider range of investors, thereby lowering borrowing costs.

Kulkarni also mentioned that the index inclusion would attract new investments from both active and passive international investors, enhancing overall liquidity in the system. He noted that similar past experiences have shown a reduction in risk premiums and borrowing costs.

He emphasized that this inclusion underscores India’s significance and highlights it as one of the largest markets among emerging economies. According to Kulkarni, the index inclusion will lead to greater integration and participation of global investors in Indian credit markets through government bonds.

The US bank plans to continue working with the central bank and its clients to encourage more investments.