Bloomberg acknowledged that India has made meaningful progress in recent years and noted that the country’s bond market is moving closer to meeting global standards required for index inclusion.
| Photo Credit:
India’s much-anticipated entry into the Bloomberg Global Aggregate Index has been delayed, with Bloomberg Index Services Ltd (BISL) deciding not to include Indian government bonds at this stage and continuing its review process.The decision means India will have to wait longer for inclusion in one of the world’s most widely tracked bond benchmarks, despite significant reforms aimed at improving market accessibility for foreign investors. Bloomberg acknowledged that India has made meaningful progress in recent years and noted that the country’s bond market is moving closer to meeting global standards required for index inclusion.“The decision is a disappointment as markets were expecting a positive outcome after the government’s decision to remove withholding tax and capital gains tax, which addressed an important part of the tax-compliance burden for foreign investors,” said Gaura Sengupta, chief economist, IDFC First Bank. “Bloomberg appears to believe that some operational and market-access challenges remain and wants to see recent reforms become more firmly established before taking a final call,” she added, stating that the inclusion in the Bloomberg Index could have eventually generated inflows of around $25 billion in FY28.FPI slowdownMeanwhile foreign portfolio investment (FPI) via fully accessible route (FAR) has slowdown in July after a bumper flow in June following the lower spread between US and Indian yield. In July FPI flows via FAR slipped 85 per cent to $322 million, compared to $2.27 billion in June 2026. However, for the seven months from January to July, the FPI inflow recorded a 6.2 per cent jump to $4.2 billion compared to $3.96 billion in the same period last year.“Bloomberg announcement is likely to trigger a near-term negative reaction. We could see some outflows from the FAR and bond yields may open higher on Monday as part of the optimism around index inclusion gets unwound,” added Sengupta.While Bloomberg recognised India’s progress through expanded electronic bond trading and the removal of key taxes for foreign investors, improving market accessibility and efficiency. It also pointed that global investors want these reforms to be more firmly established in practice before index inclusion. Concerns remain around the full rollout of automated trading across key regions and the need for smoother account-opening and onboarding processes for foreign investors.That said, Bloomberg has not closed the door on India. The review remains ongoing, and if operational bottlenecks are addressed and recent reforms deliver smoother market functioning for foreign investors, India’s inclusion prospects remain intact.Published on July 31, 2026
