Bloomberg Index Services has deferred for a second time a decision on adding Indian government bonds to its flagship Bloomberg Global Aggregate Index, saying global investors want to see recent market reforms become more firmly embedded in day-to-day trading before the bonds are admitted.
In a press release on Friday, Bloomberg Index Services (BISL) said it had continued discussions with investors, custodians, trading venues, regulators and other stakeholders following the conclusion of its consultation process in January.
Those discussions, it said, reflected broad recognition of the progress India has made in improving market accessibility. However, investors remain unconvinced that those operational improvements have been fully embedded across the market despite reforms including expanded electronic trading, broader foreign investor access, and the removal of withholding and capital gains taxes for eligible foreign investors.
“Feedback received during BISL’s continued engagement indicates that many market participants would like to see these enhancements become more firmly established in day-to-day market practice before a decision is made on index inclusion,” the press release said.
The inclusion was expected to bring foreign inflows of around $20 billion to $25 billion into gilts, dealers said.
Practice, not policy
While automated trading capabilities have expanded significantly, respondents said implementation has yet to be completed across all major investor regions, BISL said. Investors also wanted more evidence that recent reforms are translating into smoother operational workflows, including faster account opening and onboarding for foreign investors.
India has introduced several reforms over the past few years to improve access to its sovereign debt market. BISL noted that electronic trading platforms now support execution across many major investor regions and highlighted the recent removal of withholding tax and capital gains tax for eligible foreign investors in government bonds.
The index provider described those tax changes as a significant improvement to the market’s post-trade framework, reducing operational complexity and improving settlement efficiency. It said these developments address several of the operational issues raised during its consultation process.
Still, BISL said the stature of the Bloomberg Global Aggregate Index warrants a cautious approach.
“As the Bloomberg Global Aggregate Index serves as a flagship benchmark for the global investment-grade fixed income markets and underlies a broad range of investment products worldwide, BISL believes it is appropriate that any inclusion decision be supported not only by regulatory and market structure reforms, but also by demonstrated operational efficiency across the diverse range of investors that track and benchmark against the index,” it said.
The index provider reiterated that India remains on the right trajectory but said more time is needed before a final decision can be made.
“Given the significance of recent market enhancements and the importance of ensuring they are fully reflected in day-to-day market practice, BISL believes additional time is warranted for these developments to become more firmly established before making a decision,” it said.
BISL added that it will continue engaging with market participants under its governance process and provide a further update as the review progresses.
Reforms in place
The latest decision comes after the government and the Reserve Bank of India on 5 June removed some of the biggest hurdles cited by Bloomberg when it deferred a decision in January.
The government exempted foreign portfolio investors (FPIs) from income tax on interest income and capital gains arising from investments in government securities. The exemption, effective 1 April 2026, applies to all interest and capital gains earned by FPIs on G-Sec investments from that date. A similar income-tax exemption has also been granted to the Bank for International Settlements (BIS).
The RBI also expanded the universe of securities eligible under the Fully Accessible Route (FAR), allowing unrestricted foreign investment in all new issuances of 15-year, 30-year and 40-year government bonds.
While those measures addressed several operational hurdles identified by Bloomberg, Mint reported on 9 June that market participants believe the debate has now shifted from market access to whether Indian government bonds offer sufficient value to 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).
Inclusion in Bloomberg’s Global Aggregate Index is based on recommendations from an advisory committee comprising global fund managers. The next major review update for the index is scheduled for November.
