India scrapped taxes and removed caps on the ownership of some bonds for foreign investors to attract overseas capital and stabilize the rupee, which has been under pressure from higher energy prices and equity market outflows.
The government exempted foreign institutional investors from “any interest on government security, and any capital gains arising from the sale, exchange or transfer of such government security,” according to an official gazette Friday. The order eliminating the levy on interest and capital gains earned will be made retrospectively from April 1, 2026, it said.
“This will ensure stable systematic inflow of durable, patient foreign capital and long-term investors such as pension funds, insurance companies, and sovereign wealth funds,” according to a separate statement from the government.
Separately, the Reserve Bank of India also designated some long-tenor sovereign notes as fully accessible, allowing overseas investors to buy them without limits. RBI Governor Sanjay Malhotra said Friday that expanding the universe of the specified government securities under the fully accessible route will attract foreign capital.
Rising energy costs caused by the Iran war and the closure of the Strait of Hormuz have inflated India’s import bill. This, along with foreign investor outflows from the stock market have added pressure on the rupee. The currency’s weakness has prompted Prime Minister Narendra Modi to urge citizens to conserve foreign exchange by cutting fuel use, postponing overseas travel and delaying gold purchases.
The government is hoping stronger flows will help finance a widening current-account deficit and ease pressure on the balance of payments.
The government also notified its plan to permit individual persons resident outside India, or PROIs, to invest in shares of listed Indian companies through the portfolio investment scheme, according to the government statement. Bloomberg News on Thursday reported all the measures being considered by the government and the central bank.
Foreign investors have pulled out more than $26 billion this year, taking their cumulative net equity investments to a near decade-low. Benchmark Nifty 50 Index is down about 10% so far this year, extending its under-performance that pushed India out of the world’s top five stock markets.
This report is auto-generated from Bloomberg news service. ThePrint holds no responsibility for its content.