Inclusion in JP Morgan index reflects India's maturity as an economy: Dr Aurodeep Nandi, Nomura
In an interview to ET Now, Dr Aurodeep Nandi, Nomura, shares his views on India's inclusion in JP Morgan EM bond index. Edited excerpts:
ET Now: Your first thoughts on India's inclusion in JP Morgan bond index?
Dr Aurodeep Nandi: This has been going on for the past 10 years. Around this time of the year, there used to be this speculation as to whether India will get included or not.
Markets would get hyped up based on that. It is a little like the Karan Arjun Aagya kind of situation where it has finally come.
That puts a lot of speculations to rest. The way it works is that this is going to be kicked in around a year or so later.
So it is not something that will happen immediately. It will also be phased in over a period of around 10 months.
The total asset under management under this index is around $230 billion or so. So we would expect that the inflow that would eventually come to India would be to the tune of around $20-23 billion.
So, obviously positive on that front.
A lot of markets will be reacting to this or may have already reacted to this, which would be lower yields with the rupee possibly facing upward pressure. But again, if the rupee appreciates too much, then the RBI can always come in and soak it up and sort of increase its reserves.
I think the question is more in terms of what this means from a medium-term perspective. And I think the medium-term perspective is that now it sort of sophisticates the source of funding for the government which means there is more scope for banks to lend to other routes than just by government bonds.
So obviously there should be an impact in terms of more credit growth.
