Currently india is looking to ease foreign investment limits in government bonds, as it seeks to get its securities included in global bond indexes in the next two years, three government officials with knowledge of the matter told Reuters. Meanwhile New delhi is considering creating a special window for foreign passive investors that focus on index investing, one of the officials added, even as it seeks to counter the risk posed by hot money flows from more actively managed funds.
Furthermore the investors in the new window will not face the same caps as india currently has on such investments from foreign portfolio investors. Reportedly the officials, who asked not to be named as they were not authorized to discuss the matter publicly, did not provide any timeline as the issue is still in early stages of discussion while the Reserve Bank of india (RBI) declined to comment.
Moreover relaxing investment limits and a removal of restrictions on currency convertibility are among the criteria that firms operating global bond indexes consider before including any country and determining its weight age in such indexes. Perhaps given its heavy dependence on imports for fuel and other needs, india is concerned rapid inflows or outflows from foreign investors could cause sharp volatility and impact its balance of payments and currency reserves.
