More Stories

Informist, Thursday, Aug 22, 2024

 

--Govt: See up to $40 bln FPI flow in gilts in 21 mos on JP Morgan move

--Fin min: See low econ-wide borrow cost FY25 on govt fisc discipline

--Fin min: Foreign direct invest looking up as gross inflows rising

 

NEW DELHI – The government expects inflow of $20 bln to $40 bln from foreign portfolio investors into government securities in the next 18 to 21 months on account of their inclusion in JP Morgan's Emerging Markets global bond index, the finance ministry said today. This is more than the ministry's earlier expectation of an inflow of about $23 bln.

 

"The debt segment is attracting FPI inflows," the finance ministry said in its monthly economic review for July. "There's a positive outlook for investments from FPIs in debt due to India's inclusion in other global indices."

 

On Jun 28, JP Morgan added 29 bonds under the fully accessible route for inclusion in the Government Bond Index – Emerging Markets suite. Bonds available under the fully accessible route do not have any restriction on the extent of permissible foreign investment. A similar exercise will start with the Bloomberg local currency emerging markets index from Jan 31.

 

Since JP Morgan announced the inclusion of Indian gilts in September last year, FPIs have bought around $12 bln worth of gilts under the fully accessible route. India's net FPI inflow reached $44.1 bln in 2023-24 (Apr-Mar), the highest since at least 2000, reversing net outflows over the previous two fiscal years.

 

The rise in foreign demand for government securities has also lowered the borrowing cost for the Centre. The yield on the 10-year benchmark gilt has eased to 6.85% in August from 7.00% in June.

 

The bond yield has softened also because the government, in the full Budget, cut its estimate for borrowing through dated securities in the current fiscal year. The government will borrow 14.01 trln rupees through the sale of dated securities on a gross basis in 2024-25, lower than the Interim Budget's target of 14.13 trln rupees. The government had completed a record gross borrowing of 15.43 trln rupees in the last fiscal year.

 

The government has cut its fiscal deficit target to 4.9% of GDP in the full Budget from 5.1% pegged in the Interim Budget. "The commitment to fiscal discipline will not only help keep bond yields in check but will translate to lower economy-wide borrowing costs," the finance ministry said.

 

Besides FPI inflow, India's foreign direct investment is also expected to rise, the ministry said in the report. "Foreign direct investment is looking up as gross inflows are rising." India's gross foreign direct investment rose 11.9% to $22.50 bln in Apr-Jun, as per data available with the Reserve Bank of India.  End

 

US$1 = 83.95 rupees

 

Reported by Krity Ambey

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.