Buying and selling Indian government bonds

Good money can be made by buying and selling Indian government bonds. The government bonds of Asian countries are becoming increasingly attractive. Previously, many investors put their money in European government bonds, but many found either the return was too low or the risk was too high. Both issues are closer together in the case of Indian government bonds. India is the ninth largest economy in the world and is growing rapidly. Read all about it in this article. There is a lot of interest among investors to invest their money in Indian government bonds. The interest paid on the bonds is relatively high. This is extra important since the interest paid on, for example, German or Dutch government bonds has fallen sharply. Most countries worldwide have a national debt. To finance this debt they issue government bonds. This means that private individuals and companies, as it were, lend money to a country. They receive interest on that loan. The amount of that interest depends on the risk that investors will or will not lose their money. If a country is not in good financial shape, countries will want to offer a higher interest rate on the bond to make it more attractive for investors to lend their money to countries.

Buy Indian government bonds

In Europe around 2010 there was a lot of fuss about government bonds. Several countries, such as Greece and Spain, were at risk of collapse because they had rapidly rising national debt. The interest they had to pay on the national debt sometimes exceeded ten percent. Investors sought refuge with their money and subscribed en masse to German, Norwegian and Dutch government bonds. These countries have a financially reliable reputation. As a result, the interest on these government bonds fell quickly, making them no longer an interesting investment for investors. In short, European government bonds are too risky for most investors or the return is too low.

Risks of investing in Indian government bonds

Indian government bonds are an attractive option precisely because they appear to combine both factors. The interest paid on government bonds is relatively high and the risk that the country will collapse is relatively small. The high interest rates are partly due to the high inflation in India. This is sometimes 8 percent per year. Money therefore runs the risk of quickly becoming less valuable. Banks therefore have to pay a lot of interest on savings to make it attractive for people to put their money in a savings account. The same principle applies to government bonds. However, foreign investors actually benefit from this, because inflation in many European countries is at a maximum of around three percent.

The economy of India

India is the ninth largest economy in the world. In terms of global population, the former British colony has the most inhabitants after China. The country has experienced rapid economic growth in recent years. At the same time, the national debt is still relatively high from the past. The GDP is almost $1.1 trillion. The national debt in 2010 was 55.8 percent of that. The country still faces many problems that need to be solved. For example, 40 percent of the population is still illiterate and 25 percent of people live below the poverty line. There is also a lot of corruption. At the same time, investors have sufficient confidence in India. The Indian government has also made it possible for investors to buy government bonds directly on the Indian stock exchange. The Indian government has traditionally been wary of foreign investors for fear of losing too much power.