New Delhi

FTSE Russell recently announced that it would add India's sovereign bonds to its Emerging Markets Government Bond Index, or EMGBI, from September 2025. It is the third major index provider to announce this inclusion, after JP Morgan and Bloomberg Index Services.

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While one cannot assign a specific dollar value to this development, it will potentially pave the way for billions of dollars of inflow into Indian bonds as detailed in a report by Reuters. 

Brief history of the FTSE World Government Bond Index

The FTSE World Government Bond Index (WGBI) measures the performance of fixed-rate, local currency, investment-grade sovereign bonds. The WGBI is a widely used benchmark that currently includes sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 30 years of history available. The WGBI provides a broad benchmark for the global sovereign fixed-income market. Sub-indices are available in any combination of currency, maturity, or rating.

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The report further stated that the South Korean government bonds will be added to the FTSE World Government Bond Index (WGBI) two years into observation on the watch list. South Korean bonds constitute 2.22 per cent of the WGBI from November 2025 onwards.

India's bonds, which have been on FTSE's watch list for the last three years, will account for 9.35 per cent of the FTSE Emerging Markets Government Bond Index (EMGBI). Further, the total market value of the EMGBI is about $4.7 trillion.

The key highlights, said Madhavi Arora, chief economist at Emkay Global Financial Services in a note, was the positive sentiment booster in such drastic development and structurally enhancing demand for Indian bonds. Since their inclusion in the JPMorgan Emerging Market Index was announced way back in September 2023, Indian bonds have attracted nearly $18.5 billion worth of foreign inflows. These inflows have boosted market sentiments and have improved India's presence in global markets. 

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FTSE had earlier delayed the inclusion of Indian bonds in March due to tax, registration, and settlement issues; it later notes, however, that "there have been significant improvements in access to these securities". FTSE has an announcement in line with the inclusion of Indian government securities in JPMorgan's Government Bond Index-Emerging Markets starting from June 2024 and Bloomberg Index Services' Emerging Market Local Currency index from January 2025.