Caution alert for India on foreign inflows
Time to think about capital markets reforms 2.0 to meet needs of growing economy: CEA
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We know in a couple of months’ time, India will be entering into the JP Morgan government bond index. We have to deal with that and subsequently, starting in January 2025, we will also be part of the Bloomberg bond index. They will bring in patient money, and they will also bring in money flows which are not so patient in nature, said V Anantha Nageswaran, CEA
New Delhi: India’s fully accessible route bonds will be added to JP Morgan’s Government Bond Index Emerging Markets over 10 months starting June 28. The government bonds will also be included in Bloomberg’s local currency emerging market index starting January 31, over 10 months. At this juncture, the market experts caution that India needs to be very careful about its reliance on foreign flows.
In the next three to five years, India should still remain cautious about the extent of reliance on global funding. But in the second part of the journey towards 2047, there will be opportunities for us to take larger external capital, said experts.
“We know in a couple of months’ time, India will be entering into the JP Morgan government bond index. We have to deal with that and subsequently, starting in January 2025, we will also be part of the Bloomberg bond index. They will bring in patient money, and they will also bring in money flows which are not so patient in nature,” said V Anantha Nageswaran, Chief Economic Adviser (CEA).
India needs further capital market reforms to meet the growing needs of the economy, opines Nageswaran. “Capital market reforms have been one of the most successful reform interventions of technology in the last three decades. But we are at a point where we need to rethink this. So the capital market reforms 2.0 have to be thought of,” he said.
Capital market reforms were initiated by then Finance Minister Manmohan Singh following liberalisation of the Indian economy in 1991. As part of the reform, capital market regulator Securities and Exchange Board of India (Sebi) was set up in 1992 for efficient regulation and development of markets. He also said the country needs to have a ballpark estimate of investments for a holistic and comprehensive picture, while also adding that these will be met through a combination of debt and equity.
