New Delhi, Sep 22 (IANS): JP Morgan’s decision to include Indian government bonds in its widely tracked emerging market debt index indicates confidence in India's potential, Chief Economic Adviser V. Ananth Nageswaran said on Friday.

However at the same time, he cautioned that the main challenge would be to ensure that the rupee remains competitive, as there is a natural tendency for the Indian currency to appreciate.

He mentioned that this appreciation phenomenon had occurred between 2003 and 2008 when capital inflows into India surged.

"We welcome this development. JP Morgan has made this decision on their own. It attests to the confidence that financial market participants and financial markets, in general, have on India’s potential and growth prospects and its macroeconomic and fiscal policies. Just as long-term equity investors have been amply rewarded by investing in Indian markets, so will long-term investors in Indian government bonds be," Nageswaran said while reacting to the development.

JP Morgan had earlier announced India's inclusion in its Government Bond Index-Emerging Markets (GBI-EM) global index suite, effective from June 2024.