India has announced a package of foreign investment reforms aimed at providing capital account stability, strengthening the rupee, and improving liquidity and price discovery in the G-Sec market.
The reforms, announced by the Union finance ministry and the Reserve Bank of India, include measures to widen investment options for foreign individuals and portfolio investors in Indian equities and make government bonds more attractive with tax concessions.
The Reserve Bank of India has also taken monetary measures, including hedging cost subvention for external commercial borrowings, to boost foreign exchange inflows and support the rupee.
The outcome of the coordination between the finance ministry and the RBI has been reflected in the rupee appreciating 56 paise to close at 95.18 against the US dollar on Friday.
The Indian economy recorded 7.7% GDP growth in 2025-26, cementing its position as the world's fastest-growing major economy.
Retail inflation remained within the RBI's tolerance band, with headline CPI inflation rising to 3.48% in April, the highest in 13 months.
India's forex reserves stood at $682 billion as of June, providing import cover of approximately 11 months.
Gross FDI reached a historical peak of $94.5 billion in 2025-26, reflecting continued long-term investor confidence, while net FDI turned strongly positive at $7.7 billion against $1 billion the previous year.
The central objective of the reforms is to address a structural disadvantage that has kept Indian G-Secs less competitive than comparable sovereign instruments in peer emerging markets.
The government has proposed to exempt from total income any income by way of interest or capital gains arising to FIIs from investments in government securities, improving the post-tax attractiveness of Indian G-Secs.
A separate exemption has been proposed for the Bank for International Settlements on income arising from investments in Indian G-Secs through a rupee-denominated investment pool.
