The Reserve Bank of India and the Indian government announced a package of measures to attract foreign capital into the country's bonds and equities [1].
These steps aim to strengthen capital flows into Indian assets and ease pressure on the rupee. By lowering barriers for overseas investors, the government intends to stabilize the currency and increase the liquidity of domestic financial markets [2].
Central to the plan is a tax exemption for foreign institutional investors (FIIs). This exemption applies to both capital gains and interest earned on government securities [1]. The move is designed to make Indian sovereign debt more competitive against other emerging market assets [2].
Beyond tax breaks, the authorities are expanding access for overseas investors to Indian equity markets and government securities [1]. This broader access aims to diversify the investor base and reduce the volatility often associated with concentrated capital flows [2].
Additional incentives have been introduced for public sector undertaking (PSU) external commercial borrowings (ECBs) and fresh foreign currency non-resident (B) deposits [1]. According to the announced guidelines, these specific incentives for PSU ECBs and FCNR(B) deposits are available until September 2026 [3].
The coordinated effort between the central bank and the government reflects a strategic push to integrate India more deeply into global financial systems. By streamlining investment norms, the administration seeks to create a more predictable environment for long-term foreign institutional capital [2].
“The Reserve Bank of India and the Indian government announced a package of measures to attract foreign capital.”
This policy shift indicates a proactive attempt by India to shield its currency from global volatility by increasing the volume of foreign reserves. By targeting both institutional investors and PSU borrowings, the government is attempting to lower the cost of borrowing while simultaneously making the Indian bond market more attractive for global portfolios.
