India is looking to gain entry into the JP Morgan Government Bond Index – Emerging Markets Index. Although EMB is benchmarked to the J.P. Morgan EMBI Global Core Index, India’s entry into any notable developing world bond index could set the stage for entry into other indices and, subsequently, a few ETFs. PCY tracks Deutsche Bank’s DB Emerging Market USD Liquid Balanced Index, which was not mentioned in the Reuters piece. [Two EM Bond ETFs Yielding 4%]

To this point, India has been excluded from major global debt indices because of its restrictions on foreign investment in onshore debt. The country is taking steps to open its bond market to foreign investors. On Thursday, it was reported India is working with the World Bank to sell $1 billion in offshore bonds to foreign investors. [Why India ETFs Are Soaring]

To the investor not familiar with emerging markets bonds, India is conspicuous by its absence from ETFs like EMB and PCY. EMB allocates nearly a third of its combined weight to Brazil, Russia, Turkey, Mexico and the Philippines. Russia, which defaulted on its sovereign debt obligations in the late 1990s, said last year it plans to sell around $50 billion in government bonds per year through at least 2014.

PCY’s underlying index, which tries to beat the J.P. Morgan EMBI Global Index, features markets like Romania, Latvia and Sri Lanka, but not India. [Emerging Markets Bond ETFs for Yield]

Other ETFs where Indian bonds could possibly find a home or a bigger home include the new Vanguard Emerging Markets Government Bond ETF (NasdaqGS: VWOB), which tracks the Barclays USD Emerging Markets Government RIC Capped Index. VWOB already has a 1.5% weight to India, but that is less than a quarter of the weight given the United Arab Emirates.

India currently caps foreign investment in government debt at $30 billion. Foreign holdings of Indian bonds account for just 4% compared to 35% in Indonesia, Reuters reported. Indonesia, Southeast Asia’s largest economy, has experienced some of the same problems as India this year, including a plunging currency and widening current account deficit. [Indonesia ETFs: Value Plays?]

iShares J.P. Morgan USD Emerging Markets Bond ETF

Tom Lydon’s clients own shares of EMB.

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