India’s potential early inclusion in Bloomberg Barclays index draws U.S. investor interest

Prominent U.S. investment firms are pushing for an expedited review by Bloomberg Barclays Emerging Markets bond index managers to discuss India’s potential inclusion. This development, reported on Monday, comes as these firms seek to facilitate access to approximately $25 billion of bonds from one of the world’s least indebted major economies ahead of the initially planned schedule.

This urgency arises in response to JP Morgan’s recent decision to include India in its rival index, a move that could potentially undermine the competitiveness of the Bloomberg Barclays Global Aggregate index. The firms advocating for India’s swift inclusion have not linked their request to international trade settlement platforms, underscoring India’s escalating importance in global indices. This push comes amid adjustments due to Russia’s exclusion from the index and China’s slow growth.

Investors have expressed to Bloomberg Barclays that neither India’s domestic delivery and payment system for settlements nor the Euroclear settlement would pose any hindrances. The standard procedure for Bloomberg Barclays index managers is to review constituents and weights during the first quarter of each year. Typically, investments in instruments included in the index commence approximately nine months after the announcement of inclusion.

Should India be included, it could be allocated a 0.8% weightage in the Bloomberg Barclays EM index, which oversees roughly $3 trillion in assets. This weightage would translate to around $24 billion in overseas funds entering India’s government bond market.

The push for an early October review is driven by JP Morgan’s inclusion of India in its index, which has boosted overall yields and thus reduced the attractiveness of the Bloomberg Barclays index for investors. Prior to any potential inclusion in the index, discussions regarding certain taxation aspects for overseas investors with Indian authorities would be necessary, as per banking industry sources.

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