India's Inclusion in JP Morgan's Emerging Markets Bond Index

To encourage foreign investments, India has been collaborating with entities like JP Morgan to meet the stringent requirements to include Indian government bonds in their Emerging Markets Bond Index. Recently, 23 Indian government bonds worth over $330 billion made it into the index, gradually increasing their representation over ten months. This inclusion will attract foreign fund managers who benchmark their performance against the index, leading to an influx of around $20 billion in foreign capital. While this facilitates borrowing for the Indian government and makes capital available to private entities, it also exposes risks, such as the potential volatility of foreign capital and its impact on the Indian economy.