Q. In the economic context, which of the following implications can be expected if Indian bonds are incorporated into the Global Bond Indices?
1.Strengthening of Rupee
2.High Borrowing Costs
3.Increased Capital Inflows
4.Increased volatility
5.Greater control over interest rates
Select the correct answer using the codes given below:
Explanation –
When Indian bonds are incorporated into global bond indices, there will be an increase in demand for Indian bonds, leading to an appreciation of the rupee. This is because foreign investors will need to purchase rupees to invest in Indian bonds.
The inclusion of Indian bonds in global bond indices will make Indian bonds more attractive to foreign investors, leading to increased capital inflows into the Indian economy.
The inclusion of Indian bonds in global bond indices will expose Indian bonds to global market fluctuations, which could lead to increased volatility in the Indian bond market.
However, Inclusion in global indices will reduce bond yields and can lead to lower borrowing costs for the Indian government and corporates.
India’s government would have less control over interest rates, as its borrowing costs would be influenced by global market conditions.
Source: ForumIAS
