On June 28, 2024, Indian Government Bonds (IGBs) were added to the JPMorgan Emerging Market (EM) Bond Index. The process of adding IGBs to the index will take 10 months, concluding in March 2025.

The inclusion process starts with a one-percent weight on June 28, 2024, and will increase by one percentage point each month, reaching a 10% cap by March 31, 2025.

India will join China, Indonesia, and Mexico in having the highest cap of 10% in the JP Morgan Global Bond Index – Emerging Market Global Diversified Index.

Foreign investors have already put around USD 10 billion into the eligible securities that will join JPMorgan’s index on June 28. It is expected that there will be at least USD 30 billion more in investment flows in the coming months as India’s weighting on the index grows to 10%. This is likely to keep bond prices strong.

The JP Morgan Emerging Market Bond Index is an important index for emerging market bonds. It was created in the early 1990s and has grown over time to include the Government Bond Index-Emerging Markets and the Corporate Emerging Markets Bond Index. The index’s origins can be traced back to the issuance of the first Brady bond.

The JP Morgan Emerging Market Global Diversified Index manages around USD 213 billion in assets worldwide. India holds a 10% share in the index, and it is anticipated that this would attract approximately USD 21 billion (Rs 1.7 trillion) in investments by March 31, 2025, given that investors previously had no exposure to Indian bonds.

This could potentially influence other EM index providers, such as Bloomberg and FTSE, to also consider adding India, leading to additional investments in the country’s economy.

Only Indian Government Bonds (IGBs) issued under the Reserve Bank of India’s ‘Fully Accessible Route’ (FAR) are qualified for inclusion in the indices. These bonds are required to have a minimum outstanding amount of over USD 1 billion and at least 2.5 years of residual maturity. This makes all FAR-designated IGBs maturing after December 31, 2026, eligible.

The addition of Indian government bonds is expected to result in reduced weights for Thailand, Poland, and the Czech Republic in the JP Morgan Emerging Market Bond Index over the coming 10 months.