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 Global index provider FTSE Russell said on Friday it would not yet include India in an government bond index, a week after JPMorgan said India would be part of its influential GBI-EM index suite starting next year.

"Areas for improvement in the Indian government bond market structure highlighted by international investors remain largely unchanged from the previous March 2023 review," FTSE said in its annual country classification review for the FTSE Emerging Markets Government Bond Index (EMGBI)

Indian government bonds and the local currency took the news in their stride.

The rupee was trading slightly higher at 83.1000 to the U.S. dollar, after closing at 83.1850 on Thursday, while the benchmark 7.18% 2033 bond yield eased three basis points to 7.2126%, from 7.2414% at Thursday's close.

"Expectations of inclusion in the FTSE index were not very high so local markets may not react to this much, and we are not expecting any major impact as far as flows are concerned," said VRC Reddy, treasury head at Karur Vysya Bank.

Joining the FTSE index was expected to increase investments by index-linked funds. Analysts estimate India's inclusion in the JPMorgan index to bring in around $23 billion in index-linked investments.

The JP Morgan inclusion prompted BNP Paribas Asset Management to turn "more positive" on Indian bonds, Jean-Charles Sambor, head of emerging markets, fixed income at BNP Paribas Asset Management told Reuters.

Sambor expects the benchmark bond yield to ease below 7% by end of the year and the rupee to ease to 82.00-82.25 per U.S. dollar in six months.