|
India's government is likely to issue the bonds in several
tranches of at least $400 million each, one source said.
"We have spoken to major index operators and we will start
pushing these bonds in tranches very early in the first half of
the next fiscal year itself," the first official said.
The bonds would be rupee-denominated, said the officials, who
asked not to be named as the discussions were still private.
The finance ministry did not immediately reply to an email
seeking comment. India's fiscal year starts on April 1 and runs
through March.
In September, Reuters reported the government was considering a
special window free of any foreign investment cap for overseas
passive investors.
An inclusion in global indices would open India's bond market to
more investors and potentially reduce the government's borrowing
costs.
That investment could be significant in the long run, said
Ananth Narayan, associate professor of finance at S.P. Jain
Institute of Management and Research.
However, Narayan said, "if it is only a few bonds, a full-
fledged index inclusion will not happen. We will get a very
small, negligible kind of weightage on the index, but it is a
good way to start."
Generally, to include a sovereign bond global indices the
issuing country needs to remove all foreign investment caps. But
India has negotiated with some operators to open a new category
of bonds that would have no caps instead of removing the 6% cap
for the entire market, the first official said.
Finance Minister Nirmala Sithraman announced plans to fully open
a certain category of bonds for foreign investors during her
budget speech on Feb. 1, but did not give details such as
quantity, timing or tenure.
The move would reduce the amount of securities that would need
to be bought purely by domestic participants by about 4.5% at
the outset. India's total planned borrowing for 2020/21 stands
at $109.57 billion.
The Indian government is looking for fresh investors as Prime
Minister Narendra Modi plans to spend over 100 trillion rupees
to build new roads, hospitals, airports and rural
infrastructure.
Chinese renminbi-denominated government bonds were added to the
Bloomberg Barclays Global Aggregate index in April and the
country is predicted to get some $150 billion worth of foreign
investment.
Several market participants said they expect around $10 billion
to $20 billion of inflows if the bonds join a global index. The
flows could be much larger if limits on foreign ownership of
Indian bonds are completely removed.
Both the officials said that the government is in talks with
market players to gauge the appetite for such bonds and may also
increase the cap for foreign investment for the entire market if
warranted in the future.
The government is currently working on the tenures of the bonds
and could come up with 10-year benchmark bonds in the special
category as well, said the first official.
(Reporting by Aftab Ahmed in New Delhi and Swati Bhat in Mumbai)
[© 2020 Thomson Reuters. All rights
reserved.] Copyright 2020 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
