Bloomberg Again Delays India's Entry Into Its Global Bond Index

Bloomberg has again deferred the inclusion of Indian government bonds in its Global Aggregate Index, saying it needs to further evaluate both operational and market-infrastructure components. The delay disappoints investors who had expected passive inflows to follow inclusion. The report warned it could push Indian sovereign-bond yields modestly higher in the near term, as anticipated foreign demand fails to arrive on schedule.

Index inclusion has become a recurring milestone for large emerging markets seeking to lower their borrowing costs by widening the pool of buyers for their debt. For India, the appeal is a structurally cheaper source of funding for a government that borrows heavily to finance development. Each postponement keeps the domestic banking system and local institutions as the primary financiers of the state.

That dependence is a wider feature of South Asian public finance. In neighboring Pakistan, banks are expected to remain reliant on government borrowing for profits, with federal borrowing from banks rising to 5.9 trillion rupees in the current fiscal year while private-sector credit stayed far smaller. When the state absorbs most of the available bank funding, private borrowers are crowded out, and the price of that credit stays high.