The decision to include Indian government bonds in two prominent global indexes recently is being viewed as a shot in the arm for the rapidly growing country and is expected to bring in billions of inflows.
The biggest buyers of India's government debt have so far been institutional organizations such as banks, mutual funds and insurance firms but addition to global indexes means it could now diversify the country's avenues to raise funds. Such inclusions, analysts noted, could lead to billions of dollars worth of inflows into India's rupee-denominated government debt. As demand rises, bond yields fall, supporting the local currency.
It will also help India raise more funds, meet growing borrowing costs and grow the investor base for government securities. But Akintewe said that adding Indian bonds to global indexes encourage a much broader set of investors to invest in the country,"which frankly they should have been doing anyway given how strongly the market has performed."