JPMorgan will include Indian government bonds in its Government Bond Index-Emerging Markets (GBI-EM) from June 28. This is the first time that Government of India bonds will be included in this index.

Inclusion of government securities in global bond indices will have a positive impact on the Indian economy.

Indian bonds will have 10 percent weightage in the JP Morgan Emerging Markets Bond Index. The weighting of India's government bonds in this index will be gradually increased by one percent each over the next 10 months from June 28, 2024 to March 31, 2025, in a phased manner.

There have been inflows of over $10 billion into Indian bonds since JPMorgan announced the inclusion of Indian bonds in the GBI-EM in September 2023.

This move will accelerate foreign inflows into Indian bonds. Demand for Indian government bonds will increase due to influx of foreign investment. This will increase the size of the Indian bond market. Besides, liquidity and efficiency will also increase.

Till now, only banks, insurance companies and mutual funds have been major investors in government bonds. Now a large number of global investors will be able to invest in Indian bonds. This will reduce bond yields and also reduce the cost of borrowing for the government, which is expected to reduce the fiscal deficit.

Demand for the rupee will increase due to foreign inflows and hence it may remain strong in the coming months.