Select Government Bonds To Be A Part Of Global Indices Shortly: Economic Secretary

Select sovereign bonds will be included in global indices shortly, as Finance Ministry is in fairly advanced stage to list some specified categories of Government securities in this segment, said Atanu Chkraborty, Secretary, Department of Economic Affairs.

India has been seeking inclusion in the global bond index as featuring on the gauge indirectly helps the country to sell bonds overseas.

India will make select sovereign bonds available for non-resident investors. This is a crucial step toward the country's inclusion in global bond indices, which act as directional reference points for the high net-worth debt buyers in London, New York or Tokyo.

"Certain specified categories of government securities would be opened fully for non-resident investors, apart from being available to domestic investors," Finance Minister Nirmala Sitharaman had announced in the Budget.

This meant Indian bonds would be listed in global indices.

"We are in fairly advanced stage of listing some bonds in global indices. We will continue to meet all the requirements from our side. We want to get into the global indices so that large passive investments come to India. This will be a credible factor. It is going to happen very soon," Mr Chkraborty told IANS in an interaction.

He said this is a step to allow better access to Indian bonds, allowing unlimited investments in some bond categories.

Officials said the government hopes that select bonds will be included in two global bond indices in 2020/21.

The Secretary said India has G-Secs of various tenor and few of them will be picked up by the indices. Whether government issues a new series or not depends on the volume availability.

The market views the availability of select bonds for overseas investment as a precursor for India's inclusion in the global bond index, to bring additional foreign flows into sovereign bonds.

Furthermore, the government also increased the investment limit for foreign portfolio investments in corporate bonds to 15 per cent of the outstanding stock from 9 per cent.

Of late, overseas investors have not been too keen on buying bonds sold by Indian companies. They have used 58 per cent of the existing limits. Foreign portfolio investors bought Rs 1.84 lakh crore worth of corporate paper out of the Rs 3.17-lakh-crore limit.

The government has said it will borrow a net Rs 5.36 trillion from the market in 2020/21, buy back Rs 300 billion worth of bonds and switch Rs 2.7 trillion worth of debt.

When the government faces redemption pressure when they come up for maturity in exceptional circumstances, it goes for a debt switch wherein the government buys (or invests) short dated bonds (1/2/3 year bonds) and sells (or borrows) long dated bonds to push redemptions back.

On the huge volume of switch of debt, Mr Chakraborty said, "The switch has not done anything negative to the market. The government is mindful of retaining the sanctity of the yield curve since people invest on the basis of yield curve. Wherever switching is taking place, we have objectives yield curve and going to the higher end because at higher end there is lesser amount of money and it's good to be on the higher end".

"But all the securities cannot be at the higher end. If all the securities remain at the lower end, there will be a huge amount of near-term payment build in." But he declined to comment on how the government plans to meet such a huge switch target for next fiscal and government is planning to do with RBI.