Gilts set to shine on global stage
India’s much-awaited inclusion in a global bond index may happen in the next calendar year, leading to passive inflows of about $30 billion, a foreign brokerage has said.
According to Danny Suwanapruti and Santanu Sengupta, analysts at Goldman Sachs, the country’s sovereign bonds could become part of JP Morgan’s GBI-EM Global Diversified index in 2023, initially with a weightage of 10 per cent.
India has been seeking entry in the global bond index since 2019 but has got thwarted by certain regulatory issues.
The domestic bonds should become eligible for settlement through Euroclear — a platform that settles international securities transactions.
However, most of the participating nations in Euroclear impose a capital gains tax on bond transactions.
Expectations had shot up ahead of the 2022-23 Union budget that finance minister Nirmala Sitharaman would announce some relaxations on this count.
With the Centre not keen on capital gains waivers to foreign investors, the inclusion in the global bond index has been delayed.
There has been opposition from groups close to the government on granting such a relief to overseas investors as the domestic investors have to pay capital gains on the transactions.
A foreign investor has to pay a capital gains tax of 30 per cent if a listed bond is sold within a year.