Government Securities, colloquially known as G-Sec Bonds, represent a cornerstone of fiscal policy. These debt instruments, issued by the Central government, serve as a financial conduit to meet the nation’s fiscal requirements. In the Indian context, the Reserve Bank of India (RBI) takes up the mantle of issuing these bonds.
JPMorgan, recently included India’s government bonds in their esteemed emerging market indices. These indices encompass the EMBI (Emerging Markets Bond Index), GBI-EM (Global Bond Index - Emerging Markets), and CEMBI (Corporate Emerging Markets Bond Index) series. The inclusion of 28 government bonds worth more than $400bn will give India a 10 per cent share of the widely tracked measure, according to JPMorgan. Indian bonds will likely also get included the Bloomberg Emerging Market Local Currency Government Index as early as next year January.
Historically, India has leaned heavily on domestic funding mechanisms orchestrated by the public sector. While this approach has fuelled ambitious initiatives, it has also exacted a toll. The cost of borrowing, especially for infrastructure projects with lofty aspirations, has been disproportionately high. Even eco-friendly endeavours aimed at combating climate change have grappled with this financial burden. With greater accessibility to government bonds, foreign investors can unlock a larger slice of India’s domestic financial resources.
This inclusion transcends mere symbolism. It diversifies the investor base, infusing dynamism into India’s capital market. The inclusion in global indices not only opens doors for investment but also validates India’s financial prowess. The G-Sec Bonds, are all set to dance on the global stage, inviting investors to partake in India’s growth story.