Foreign Investment in Indian Government Bonds

The interest of foreign investors in Indian government bonds has significantly increased following J.P. Morgan's decision to include Indian bonds in its emerging market bond indices. This inclusion, set to take place from June 2024 to March 2025, is expected to result in inflows of approximately $25 billion into the Indian bond market. Prior to the announcement, foreign ownership of these bonds was at a mere 1%, one of the lowest in emerging markets, prompting the Reserve Bank of India to introduce a new route for unrestricted foreign investment. Since the announcement, bond yields have been positively affected, decreasing from 7.15% to 6.85%, which in turn benefits corporate bonds and lower interest rates for companies borrowing from money markets.