Bloomberg Defers India Bond Inclusion in Global Aggregate Index Again

Bloomberg Index Services has once again postponed a decision on adding Indian government bonds to its flagship Bloomberg Global Aggregate Index, saying investors want to see recent market reforms become more established in everyday trading before inclusion takes place.

In a statement issued on 31 July, Bloomberg Index Services (BISL) said it had continued discussions with investors, custodians, trading venues, regulators and other stakeholders after its consultation process concluded in January.

According to BISL, market participants broadly acknowledged the progress India has made in improving access to its bond market. However, many investors remain unconvinced that the operational changes introduced in recent years have been fully embedded across the market. The reforms include wider electronic trading access, expanded participation for foreign investors and the removal of withholding tax and capital gains tax for eligible foreign investors.

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The index provider said feedback gathered during its continued engagement showed that several participants would prefer to see these measures become more firmly rooted in day-to-day market activity before a final inclusion decision is taken.

Market dealers have estimated that inclusion in the Bloomberg Global Aggregate Index could attract foreign inflows of around $20 billion to $25 billion into Indian government securities.

While electronic trading capabilities have expanded considerably, BISL noted that implementation remains incomplete across all major investor regions. Respondents to the consultation process also indicated that they want greater evidence that recent reforms are leading to smoother operational processes, including quicker onboarding and account opening for foreign investors.

India has introduced several measures in recent years to make its sovereign debt market more accessible. BISL noted that electronic trading platforms now support execution across many major investor regions. It also highlighted the removal of withholding tax and capital gains tax on government bonds for eligible foreign investors.

The index provider described the tax-related changes as a significant improvement to the post-trade framework, saying they help reduce operational complexity and improve settlement efficiency. According to BISL, these steps address several concerns that surfaced during the consultation process.

Even so, the organisation said the importance of the Bloomberg Global Aggregate Index requires a cautious approach. BISL stated that any inclusion decision should be backed not only by regulatory and market-structure reforms but also by clear evidence of operational efficiency across the range of investors that follow and benchmark against the index.

While noting that India remains on the right path, BISL said additional time is needed before reaching a final decision. The organisation added that it will continue engaging with market participants through its governance process and provide another update as the review advances.

The latest postponement comes after the Government of India and the Reserve Bank of India introduced measures on 5 June that addressed some of the key concerns highlighted when Bloomberg deferred its decision earlier in the year.

The government exempted foreign portfolio investors (FPIs) from income tax on interest income and capital gains earned from investments in government securities. The exemption, effective from 1 April 2026, applies to interest income and capital gains earned by FPIs on G-Sec investments from that date. The same tax benefit is being accorded to the Bank for International Settlements (BIS).

The RBI also expanded the universe of securities eligible under the Fully Accessible Route (FAR). There would be no restriction on foreign investment in any 15-year, 30-year and 40-year government bonds newly issued.

Despite these measures, Mint reported on 9 June that some market participants believe the discussion has now shifted from market accessibility to whether Indian government bonds provide adequate value for global investors.

India is already included in the JP Morgan Global Bond Index-Emerging Markets since June 2024, Bloomberg's EM Local Currency Government Index since January 2025, and the FTSE Russell Emerging Market Index since September 2025.

Recommendations for inclusion in the Bloomberg Global Aggregate Index are made by an advisory committee comprising global fund managers. The next major review update for the index is scheduled for November.