India Makes Fresh Bid to Join Premier Global Bond Indices Following Tax Reform

India Seeks to Secure Sovereign Debt Inclusion in Global Bond Benchmarks

India is reportedly preparing a fresh push to secure inclusion of its sovereign debt in some of the world's most influential bond benchmarks, including the Bloomberg Global Aggregate Index. This move comes after the government unveiled a series of measures aimed at making the country's debt market more attractive to foreign investors.

According to an Economic Times report, officials from the Reserve Bank of India (RBI) and the finance ministry are expected to engage with global bond index providers and may also initiate discussions with the Basel-based Bank for International Settlements (BIS), a major investor in government securities. The BIS was recently granted special tax-exempt status as part of a broader policy overhaul designed to improve India's appeal to overseas investors.

The government's latest reforms include scrapping the 12.5 percent long-term capital gains tax and the 20 percent withholding tax that foreign portfolio investors (FPIs) previously paid on investments in government securities. Authorities have also significantly expanded the pool of bonds available under the Fully Accessible Route by including 15-year, 30-year and 40-year government securities, along with sovereign green bonds.

Read also: India's Nuclear Arsenal Surpasses 190 Warheads, Widening Gap with Pakistan: SIPRI Report

Market participants estimate that the latest changes could attract between $7 billion and $11 billion in fresh foreign inflows, with around $5 billion potentially entering Indian government bonds even before any formal index inclusion. The measures address key concerns previously flagged by global index providers, including tax treatment, market access, and settlement infrastructure.

India already features in JPMorgan's Emerging Markets Bond Index, Bloomberg's EM Local Currency Government Index, and the FTSE Russell Emerging Market Index. However, Bloomberg deferred India's inclusion in its flagship Global Aggregate Index earlier this year, citing operational and market infrastructure challenges.

Inclusion in the benchmark could unlock billions of dollars in passive foreign investment, lower government borrowing costs, deepen the domestic bond market, and provide support to the rupee.