The inclusion of Government Securities in global bond indices can counter the volatility arising from Fed policy normalization. Do you agree with this view? Analyse (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· The US Federal Reserve has taken a definitive step towards normalising its easy monetary policy and this can have ramifications for financial markets across the globe.
· This implies that global liquidity that is fuelling asset price inflation globally will not be impacted in the coming year.
· the progress made towards including Indian sovereign bonds in global bond indices is welcome.
· The introduction of Fully Accessible Route (FAR) for FPIs investing in G-secs in 2020 was the first major step towards this move.
· Not only will this inclusion result in annual inflows of $18.5 billion over the next decade, as reported by Morgan Stanley, these flows are likely to be more stable and long-term in nature, when compared to the hot money that is influenced by central bank actions and global liquidity.
· The Centre should however decide on the taxation of these securities when both the buyer and seller are not Indian citizens and the intermediary is also outside India.
· Other minor bottlenecks such as simplifying the registration process for FPIs wishing to invest in G-secs, improving the trade matching system and providing access to hedging tools to FPIs should also be expedited.
Nivetha 3 years
please review
IAS Parliament 3 years
Try to provide a coprehensive conclusion. Keep Writing.
Manish 3 years
IAS Parliament 3 years
Good attempt. Keep Writing.
