Global index provider FTSE Russell said on Tuesday it would include India's sovereign bonds in its Emerging Markets Government Bond Index (EMGBI) from September 2025, after index inclusion by JP Morgan and Bloomberg Index Services, potentially drawing billions of dollars into local bonds.

The London-based index provider also added South Korean government bonds to the FTSE World Government Bond Index (WGBI) after two years on its watch list.

South Korean government bonds would represent 2.22% of the index on a market value-weighted basis and would be included in the FTSE's WGBI beginning in November 2025, FTSE said in a statement.

Indian securities will be a part of FTSE's EMGBI after being on the index provider's watch list for the last three years. It would represent 9.35% of the index on a market-value weighted basis, FTSE said.

The market value of the EMGBI is $4.7 trillion, according to the FTSE release.

"The decision is a sentiment positive and will strengthen the demand side of India bonds structurally," said Madhavi Arora, chief economist at Emkay Global Financial Services.

Indian bonds have seen foreign inflows of nearly $18.5 billion since the announcement of inclusion into JPMorgan Emerging Market index in September 2023.

In a March review, FTSE had deferred inclusion of Indian bonds in its index due to taxation, registration and settlement issues but acknowledged India's progress in the accessibility of the securities.

FTSE's announcement follows inclusion of Indian government securities in JPMorgan's Government Bond Index-Emerging Markets index starting in June 2024 and Bloomberg Index Services' Emerging Market Local Currency starting in January 2025.

(Reporting by Nikunj Ohri, Surbhi Misra and Mrinmay Dey; Editing by Jonathan Oatis and Jacqueline Wong)