Bloomberg delays India bonds inclusion in global index as investors seek proof reforms work

Bloomberg Index Services has delayed a decision on including Indian government bonds in its Global Aggregate Index, saying recent market reforms are positive but need more time to show they work smoothly for foreign investors. The decision keeps India’s bonds under review for one of the world’s major fixed income benchmarks.

Inclusion in the Bloomberg Global Aggregate Index is sought after because the index is tracked by a wide range of global investment products and could bring more foreign investor attention to Indian government debt.

Bloomberg said India’s government bond market has made "meaningful progress" toward meeting global standards for inclusion. It cited expanding electronic trading access and recent tax changes for eligible foreign investors as key improvements.


But the index provider said many market participants want to see these changes become more firmly established in daily market practice before a final decision is taken.

Bloomberg said India has recently removed withholding taxes and capital gains taxes applicable to eligible foreign investors in government bonds. The move was described as a significant improvement to the post-trade framework because it reduces operational complexity and improves settlement efficiency.

For foreign bond investors, taxes and settlement processes are key concerns. Even when yields are attractive, operational friction can make a market harder to track for large passive funds and global fixed income investors.

Bloomberg said these reforms respond to several of the operational issues raised during its consultation process.

The review has also taken place alongside growth in electronic trading for Indian government bonds. Automated trading platforms now support execution across many major investor regions, according to the announcement.

Despite the progress, Bloomberg said feedback from market participants showed that implementation is not yet fully complete across all major investor regions.

Some respondents also want more evidence that the reforms are improving actual workflows, including account opening and onboarding for foreign investors.

Bloomberg said the Global Aggregate Index is a flagship benchmark for global investment-grade fixed income markets. Because of that, any inclusion decision should be backed by both reforms and demonstrated operational efficiency across the range of investors that use the index.


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