Bonds and happiness.

"JP Morgan will include India in its widely tracked emerging market index, setting the stage for billions of dollars of inflows into the world's fifth-largest economy and helping it finance its current account and fiscal deficits." Reuters. "JP Morgan said 23 Indian Government Bonds (IGBs) with a combined notional value of $330 billion, all of which fall under the 'fully accessible route' for non-residents are eligible." "India's 10-year bond yield dropped 7 basis points to a two-month low of 7.0788% in opening trade but retreated to 7.12% by 0700 GMT, while the rupee gained 0.3% early to 82.25 per dollar before giving up some gains to trade at 82.93." Inclusion will start on June 28, 2024." India's weight in the index is expected to be 10%, the maximum for any country, and is expected to attract $30 billion from foreign investors. TOI. It is happening because "Russia's exclusion from the JP Morgan gauges after it invaded Ukraine may have added to incentives for the index compilers to fill the hole with Indian debt." Russia's weight was 8%. "Goldman Sachs expects India's inclusion to attract over $40 billion in bond market inflows within 18 months, with $30 billion from passive and $10 billion from active inflows." Mint. "The inclusion to the indices comes despite the government resisting changing the tax treatment for gains made by foreign investors from the sale of Indian government bonds, a major bone of contention between India and the index providers." "The inclusion of Indian government securities in the JP Morgan emerging market debt index has the potential to make the rupee stronger and reduce the government's borrowing costs, chief economic advisor (CEA) in the finance ministry V Anantha Nageswaran told reporters." Mint. "One challenge of more foreign investments coming into government bonds is the volatility it could introduce in the India bond market and currency at times based on investor response to global developments." Buying government bonds means financing its borrowing, or fiscal deficit. "The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government." ET. India's fiscal deficit is expected to be 5.9% of GDP in 2023-24 and the government hopes to bring it down to 4.5% by 2025-26." pbi.gov.in. If the rupee falls against other currencies, interest and redemption payments will rise. However, the CEA expects the rupee to harden against other currencies as foreign investors start pouring money into India. That will surely make imports cheaper while raising the prices of our exports. "India's overall exports (merchandise and services combined) in August stood at $60.87 billion, which is 4.17 percent lower when compared with the same month last year." DH. Overall imports were down 5.97% to $72.50 billion, so that the trade deficit was $11.63 billion which was less than $13.58 billion last year. And, of course, JP Morgan could dump Indian bonds, as they dumped Russian ones, if the US government says so. Be careful in your happiness. Could bonds lead to bondage?