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Indian domestic bonds will be included in the JPMorgan emerging market debt index from June 2024, paving the way for billions of dollars worth inflows into the world's fifth-largest economy.

Here are reactions from analysts, economists and market participants:

SANJAY MATHUR, CHIEF ECONOMIST, SOUTHEAST ASIA AND INDIA, ANZ, SINGAPORE:

"Bond inclusion should help lower the cost of capital, at least indirectly. At the same time, we note that bond inclusion will add to volatility in Indian bonds. This has been the experience of most economies that have liberalised debt flows but have faltered on fiscal discipline and sticking to inflation targets."

RAHUL BAJORIA, HEAD OF EMERGING MARKET ASIA (EX CHINA) ECONOMICS, BARCLAYS, INDIA

"The index inclusion news should help support sentiment on both FX and bonds, both of which had been under some pressure. While inclusion is only from mid 2024, it would be reasonable to expect inflows to start from now itself.

MIN DAI, STRATEGIST, MORGAN STANLEY ASIA, SINGAPORE

"In the short term, we expect 10-yr G-sec and INR to outperform. We like long 10-yr G-sec outright without FX hedge and we also add a bond to our paying 5-yr NDOIS trade as we expect the asset swap to tighten.

In the longer term, this could trigger other index inclusion, such as to the Bloomberg Global Aggregate Index, which could attract another US$10 billion. Annual inflows into the G-sec market beyond the inclusion could be US$18.5 billion."

JAYESH MEHTA, INDIA COUNTRY TREASURER, BANK OF AMERICA, INDIA

"Assuming there are no negative surprises on the macro front, I expect debt inflows of up to $35 billion coming into India by 2026.

The move will also pave the way for inclusion of debt in other indices like Bloomberg Barclays Global Aggregate Index very quickly and we see that happening this year itself."

MADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES, INDIA

"Apart from the passive flows owing to the one-time stock adjustment, this move could lead to fresh active flows in the debt market, which remains under-penetrated on external financing.

This will not only result in lower risk premia, but also help India to finance its fiscal and CAD as well as enhance the liquidity and ownership base of G-Secs."

GAURA SEN GUPTA, INDIA ECONOMIST, IDFC FIRST BANK, INDIA

"Post the inclusion into JP Morgan EM Bond Index, India's chances of Inclusion into Bloomberg Global Aggregate Index also rises. In case India is included in the Bloomberg Global Aggregate Index, it could result in inflows of US$15bn to US$20bn with India's weight ranging from 0.6% to 0.8%.

In case inclusion into Bloomberg Global Aggregate Index is also announced then 10-yr yield could reduce below 7.0% by March 2024."

CITI RESEARCH ANALYSTS

"It is noteworthy that active investors and pre-positioning by banks to facilitate passive index manager demand typically starts months in advance of actual inclusion.

This announcement should also drive expectations of India's bond index inclusion announcements from other index managers like the Bloomberg Barclays Global Aggregate Index."