Indian bonds to be included in FTSE Russell index from September 2025

• Global index provider FTSE Russell announced on Tuesday that it will include Fully Accessible Route (FAR)-eligible Indian government bonds in its FTSE Emerging Markets Government Bond Index (EMGBI) starting September 2025.

Highlights:

• FTSE Russell, a global index provider, announced on Tuesday that it will add Fully Accessible Route (FAR)-eligible Indian government bonds to its FTSE Emerging Markets Government Bond Index (EMGBI) starting in September 2025. This marks India's third inclusion in a major global bond index, following JP Morgan Chase & Co and Bloomberg.

Expansion to Regional Bond Indices:

• In addition to the EMGBI, Indian government bonds will also be included in the FTSE Asian Government Bond Index (AGBI) and the FTSE Asian-Pacific Government Bond Index (APGBI). These inclusions will enhance India's presence in regional and global bond markets.

Reclassification of India’s Market Accessibility Level:

• The decision comes after the reclassification of India’s Market Accessibility Level from 0 to 1, reflecting improved access for international investors. The reclassification allows for the inclusion of Indian bonds in the EMGBI and other regional indices over a six-month period, starting from September 2025.

Phased Bond Inclusion:

• The inclusion process will be gradual, with Indian bonds being added to the indices in six equal tranches over six months. FAR bonds, which are government bonds that allow unrestricted investment by non-residents, will be included in the index, including securities with 14- and 30-year tenors issued before July 29, 2024.

Significant Market Presence:

• As of October 2024, 32 Indian government FAR bonds, worth approximately USD 473.8 billion, are projected to be eligible for inclusion. These bonds will represent 9.35% of the EMGBI on a market value-weighted basis. India will also comprise 10% of the EMGBI 10 per cent Capped Index and 9.73% of the AGBI.

Attracting Foreign Capital:

• The FAR bond program was designed to attract foreign capital to India’s debt market by offering unrestricted access to non-resident investors. This is expected to increase India's visibility and participation in global financial markets, particularly with the inclusion in major bond indices.

FTSE Market Accessibility Framework:

• FTSE’s Fixed Income Country Classification Framework assesses market accessibility based on criteria like the regulatory environment, foreign exchange market structure, and bond market structure. Countries are assigned a Market Accessibility Level ranging from 0 to 2, with Level 2 being the highest.

Other Major Inclusions: JP Morgan and Bloomberg:

• India's inclusion in FTSE follows recent announcements by JP Morgan and Bloomberg. In September 2023, JP Morgan announced the inclusion of Indian government bonds in its GBI-EM Global index, a process expected to bring nearly $25 billion in foreign investment by March 2025.
• Similarly, Bloomberg will add Indian bonds to its Emerging Market Local Currency Government Index by January 2025, likely attracting over $5 billion.

Prelims Takeaways:

• FTSE Asian Government Bond Index (AGBI)
• FTSE Russell