As per a leading business daily report, the government of India is mulling over a proposal to increase foreign investment in sovereign bonds from the current 6% to at least 10% of the outstanding stock. This is sought for the inclusion of the country's debt in international indexes. Further the report suggested that the finance ministry in order to go ahead with the inclusion has written to Bloomberg LP and JPMorgan Chase & Co., who are responsible for managing such indexes.
It is worth mentioning that the plan to increase the limit of foreign investors in bonds has come up at a time when Indian debt is seeing less of interest owing to several macro factors that include rising inflation, fluctuating price of oil and a wider than budgeted fiscal deficit. Any decision on the front will likely be announced in the Budget 2020.
After the last week's bi-monthly monetary policy statement that came as a surprise with a rate pause, yield on 10-year benchmark government bonds spiked more than 30 bps. 1 bps is one-hundredth of a percentage point.
In accordance with the data compiled by Bloomberg, foreign funds bought sovereign debt of the country worth as much as $30 billon or Rs. 2.1 trillion as against the current permissible limit of Rs. 3.61 trillion. Further as per a survey result of asset managers by Bloomberg, if there is taken any measure to ease access to India's bonds, which is highly restricting among Asian economies, there would be a jump in foreign inflows.