India did the homework. Removed the tax on overseas bond investors. Rolled out the welcome mat for foreign portfolio money. And Bloomberg Index Services still said “not yet.”

BISL announced on July 31 that it would once again defer the decision on whether to include Indian government bonds, known as G-Secs, in the Bloomberg Global Aggregate Bond Index. This is the second deferral in roughly six months, following a similar postponement on January 13. The index serves as a benchmark for trillions in assets under management across ETFs and index funds, making inclusion a very big deal for any sovereign debt market hoping to attract global capital.

What’s holding things up

India’s government made a notable move in June by eliminating a tax on overseas bond investors, a reform specifically designed to smooth the path toward index inclusion.

But BISL pointed to a different set of concerns. Investors tracking the index want more confidence in what the firm called “consistent operational enhancements.” In English: settlement processes are still too slow, tax administration remains clunky, and trading automation isn’t where it needs to be.

BISL emphasized that its approach is rules-based, not discretionary.

Had the bonds been included, Indian G-Secs would have carried an initial weighting of roughly 0.7% in the index. Projected cumulative inflows were estimated between $25 billion and $27 billion by fiscal year 2028.

Market reaction and bond yield pressure

Indian bond yields rose following the deferral announcement. The same thing happened after the January deferral.

When JP Morgan added Indian bonds to its Emerging Market Bond Index in 2024, it validated years of incremental reforms. A Bloomberg inclusion would have been the next rung on the ladder, bringing a different and arguably more influential pool of passive capital.

Why crypto investors should care

Several protocols have been exploring tokenized exposure to emerging market sovereign debt as a yield-generating primitive. Indian G-Secs, with their relatively attractive yields compared to developed market bonds, have been on the radar of teams building real-world asset (RWA) platforms. A Bloomberg index inclusion would have brought standardization and liquidity that makes tokenization more viable. The deferral effectively delays that opportunity.

The operational concerns BISL cited, settlement delays, automation gaps, and tax process friction, are precisely the problems that blockchain-based settlement infrastructure claims to solve.

BISL has committed to continued engagement with both investors and Indian regulators, but no timeline has been set for the next review.