Bloomberg Again Delays Indian Government Bonds' Entry to Its Global Aggregate Index

Bloomberg has again deferred the inclusion of Indian government bonds in its Global Aggregate Index, saying it needs additional time to evaluate both operational and market infrastructure, according to the Economic Times. Index inclusion would bring passive foreign inflows into Indian debt, and each delay postpones that demand. The report noted the delay could produce an immediate rise in sovereign bond yields.

The episode shows how emerging-market governments depend on the operational systems of global finance to lower their borrowing costs. Until index providers judge a market's settlement, access, and infrastructure adequate, the expected inflows do not arrive, and local yields carry a higher risk premium than they otherwise would.

A related dependence appears in neighboring Pakistan. The newspaper Dawn reported that the banking sector is likely to keep relying on lending to the government for its profits, with federal borrowing from banks rising to 5.9 trillion rupees in the current fiscal year while the private sector received about 1.4 trillion. In both cases, the state's financing needs determine where capital goes, crowding out private borrowers in Pakistan and leaving India waiting on foreign inflows that index rules control.