India has much to learn from the opening of China's onshore bond market.
Last year, Beijing allowed overseas investors to access local-currency securities via its so-called Bond Connect. On Friday, Bloomberg LP announced the inclusion of Chinese government and policy-bank debt in the Bloomberg Barclays Global Aggregate Index.
Over a 20-month period starting in April next year, as many as 386 bonds will enter the $53.73 trillion benchmark, giving China a weight of 5.49 per cent at full inclusion. Yuan-denominated notes will end up with the fourth-largest presence, after those in US dollars, euros and yen.
Contrast this with India, which has been on a path of gradual debt-market globalisation for more than two decades. Yet by limiting foreign participation to 5 per cent, authorities have crimped the prospects of India's admittance to global gauges compiled by JP Morgan and Bloomberg.
This is an odd policy choice. China has more than ample domestic savings to power its economy, but it wants to share credit risk meaningfully with foreigners. India, meanwhile, runs a current account deficit, implying a perennial reliance on overseas savings. So why doesn't the central bank allow more borrowing in domestic currency, which it can freely print, rather than cling to riskier dollar inflows?
It isn't an idle query. The country's basic balance of payments - the sum of the current account deficit and net foreign direct investment - has turned negative. This is when crude oil, which India needs to import, is at only $66 a barrel. Should oil prices firm further, and foreign portfolio investment in stocks and bonds ebb, the rupee would need to weaken to make Indian assets attractive again.
While currency values can and do adjust relatively freely in developed economies, excessive exchange-rate volatility in emerging markets tends to lead to a hard choice between capital controls and high local interest rates. That's what happened during the destabilising taper-tantrum episode of 2013.
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This time around, the Reserve Bank of India (RBI) is buying dollars to make sure the rupee doesn't strengthen to a point where investors lose confidence in its value. But foreign money has already started leaving the Indian bond market; in the face of rising US interest rates, especially a surging dollar Libor, India needs a new category of bond buyers. That's where aiming for index inclusion could help.
Sovereign credit rating is the one benchmark Indian authorities obsess over endlessly. Indexes - both equity and debt - don't get as much attention. The disregard that local stock exchanges demonstrated for India's 9 per cent weight in MSCI's emerging-market gauge when they came together to ban index providers from supplying local securities data to foreign bourses is reflective of that cavalier mindset. A comparison with China, which courted MSCI until it won a place for yuan-denominated stocks in the measure, is once again instructive.
The difference is starker in debt. Nomura has estimated that a 1 percentage point increase in the limit on foreign participation would lead to 800bn rupees (Dh45.17bn) of inflows. What's more, becoming a part of an index would mean access to a certain assured sum from funds merely looking to replicate the benchmark. The risk of so-called "sudden stops" would be lower.
“Masala” bonds, or rupee-denominated credit offshore, are only viable for large, mostly state-linked Indian issuers. Where will single-B rated borrowers go? The RBI won't let them offer high interest rates even on rupee notes in international markets; the onshore debt market is already in trouble because of a 1 percentage point jump in 10-year sovereign bond yields since July.
Over the past several years, the world's attention has been focused on China's excessive credit build-up. But the number of steps Beijing has taken to prevent an accident - from shuttering excess capacity in steel and aluminium and stopping a one-way bet on yuan appreciation to squeezing easy liquidity and going after sales of wealth management products masked as insurance - have all helped maintain a semblance of calm.
Underneath, there still are fault lines, for instance in rapid growth of consumer credit. But the mess in India's banking system, hobbled by more than $200bn in stressed assets, is many times more pressing than any challenge facing China.
One of the solutions for making banks healthy in the long run would be to let active, deep onshore bond markets put a price on credit risk. The price tag need not be prohibitive, provided India drops its historical aversion to being in debt to foreigners. Mimicking China's playbook on index inclusion would be a good starting point.
Bloomberg
Quick%20facts
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The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
FINAL RESULT
Sharjah Wanderers 20 Dubai Tigers 25 (After extra-time)
Wanderers
Tries: Gormley, Penalty
cons: Flaherty
Pens: Flaherty 2
Tigers
Tries: O’Donnell, Gibbons, Kelly
Cons: Caldwell 2
Pens: Caldwell, Cross
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Where to buy
Limited-edition art prints of The Sofa Series: Sultani can be acquired from Reem El Mutwalli at www.reemelmutwalli.com
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Killing of Qassem Suleimani
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The Bio
Favourite place in UAE: Al Rams pearling village
What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft
Your favourite type of pearl: All of them. No pearl looks the same and each carries its own unique characteristics, like humans
Best time to swim in the sea: When there is enough light to see beneath the surface
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Sarfira
Director: Sudha Kongara Prasad
Starring: Akshay Kumar, Radhika Madan, Paresh Rawal
Rating: 2/5
Mountain%20Boy
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GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
FIGHT CARD
1. Featherweight 66kg
Ben Lucas (AUS) v Ibrahim Kendil (EGY)
2. Lightweight 70kg
Mohammed Kareem Aljnan (SYR) v Alphonse Besala (CMR)
3. Welterweight 77kg
Marcos Costa (BRA) v Abdelhakim Wahid (MAR)
4. Lightweight 70kg
Omar Ramadan (EGY) v Abdimitalipov Atabek (KGZ)
5. Featherweight 66kg
Ahmed Al Darmaki (UAE) v Kagimu Kigga (UGA)
6. Catchweight 85kg
Ibrahim El Sawi (EGY) v Iuri Fraga (BRA)
7. Featherweight 66kg
Yousef Al Husani (UAE) v Mohamed Allam (EGY)
8. Catchweight 73kg
Mostafa Radi (PAL) v Abdipatta Abdizhali (KGZ)
9. Featherweight 66kg
Jaures Dea (CMR) v Andre Pinheiro (BRA)
10. Catchweight 90kg
Tarek Suleiman (SYR) v Juscelino Ferreira (BRA)
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Wonka
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
The biog
Name: Atheja Ali Busaibah
Date of birth: 15 November, 1951
Favourite books: Ihsan Abdel Quddous books, such as “The Sun will Never Set”
Hobbies: Reading and writing poetry
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Company profile
Name: Infinite8
Based: Dubai
Launch year: 2017
Number of employees: 90
Sector: Online gaming industry
Funding: $1.2m from a UAE angel investor
