India to Allot Special Series Rupee Bonds for Non-resident Investors: FinMin
IANS 04 February 2020
The Ministry of Finance will soon allot special series rupee government bonds that are open for global and domestic investors. "Assuming that they meet size and liquidity criteria, they will be eligible for index inclusion and thereby provide access to this large and stable source of capital," the ministry says in a series of tweets.
 
It also clarified that non-resident investors in the Budget speech is related with foreign investors and not non-resident Indians (NRIs) as being reported. These non-resident investors would be allowed to invest freely in certain categories of government securities with an aim at inclusion in global bond indices, it added.
 
 
Inclusion in global indices was discussed in September 2019 at the Bloomberg conference in New York attended by prime minister (PM) Narendra Modi.
 
According to Sanjeev Sanyal, principal economic adviser in the finance ministry, global bond indices represent trillions of US dollars of sticky money. He says, "Being included in the indices, therefore, would provide a cheap and stable source of foreign capital. The catch is that global bond indices insist that there should be no restriction of entry or exit from a market. So, simplest way to gain inclusion would have been to remove the 6% limit of FPI holdings. However, that would expose the Indian economy to the impossible trinity."
 
 
"One way to out of the dilemma was to exploit a characteristic of global bond indices. It is the bond and not the country that is given weightage. This means the market need not be fully opened as long as specific bonds are fully open to international investors. In other words, we can now issue special series government bonds that are open for global and domestic investors. Assuming that they meet size and liquidity criteria, they will be eligible for index inclusion and thereby provide access to this large and stable source of capital," Mr Sanyal added.
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