Why India may get more than $23 billion in the next few months, according to this economist

Samiran Chakraborty of Citi says India is the darling of investors among emerging market (EM) countries and this will translate into a significant amount of inflows into India.

This time around, however, he expects a shift in the pattern of inflows. While India traditionally draws more equity inflows, he now expects more bond inflows given India's inclusion in global indices.

"We've already seen about nine to $10 billion of inflows into bonds from the September inclusion announcement date. But mechanically speaking, this number is supposed to be about $23 billion. Our suspicion is that it will turn out to be higher than that, not lower than that," he told CNBC-TV18 in a conversation from the sidelines of Citi's 2024 Investor Conference.

In September last year, JPMorgan Chase & Co. said it will be including Indian government bonds (IGBs) into its benchmark Emerging Market index, starting June 28, 2024.

Bloomberg also, in March this year, announced the inclusion of India Fully Accessible Route (FAR) bonds in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices. These bonds will be phased in over a ten-month period, starting January 31, 2025.

The inclusion in these global indices is expected to drive billions worth of inflows into India's debt market.

"In fact, that is probably the learning that I had, in my recent conversations that it's not just the index tracking funds that will be bringing in the money. It's often even the non index-tracking funds, including some of the global funds, which will start making some allocations towards India," he stated.

If India starts getting newer indices joining the party, then inflows could be even larger, he said, adding that the only caveat is that this is a one time flow from next year onwards. “From next year onwards, the flow could be $2-5 billion but not $25-30 billion,” he said.