Indian bonds not included in FTSE Emerging Market bond index, remain on watch list

However, certain criteria for inclusion, such as improved regulatory reporting and tax clearance processes, have not been met by the Indian market, according to FTSE.

This also underscores the challenges some investors encounter in accessing India's bond market. Interestingly, amidst this development, India's debt is slated to join the JPMorgan emerging markets index starting in June of this year.

The inclusion of Indian Government Bonds (IGBs) will be phased in over a ten-month period, commencing on June 28, 2024, and concluding on March 31, 2025, with a monthly weightage increase of 1%.

While JPMorgan sees inflows to the tune of $40 billion in the country's bond market post this move, HSBC sees a $30 billion inflow.

Additionally, Bloomberg will also be including Indian bonds to its Emerging Market bond indices from January 31, 2025, which will also be staggered over a 10-month period. DBS expects an inflow between $3 billion to $4 billion post this inclusion.

FTSE also retained Pakistan on the watch list for potential demotion to frontier market status from a secondary emerging market amid a steady decline in its index weight over the past few years.

In an interview with CNBC-TV18, Jayesh Mehta, Vice Chairman and CEO, of DSP Finance said, "As of right now, there is no disappointment because of this six months extension or other stuff. Completely on the FTSE, nobody's going to look at it. And to be honest, whether they take the inclusion now, in fact, that would have been more painful. Let that get deferred because we don't want so much flow coming into India at one point in time. So that will be good for the country."