The Reserve Bank of India (RBI) and the central government on Friday unveiled a package aimed at attracting foreign capital amid the West Asia crisis.
The measures may attract inflows of up to $50 billion, according to a report by Business Standard citing economic experts. The amount may be sufficient to cover much of the projected balance of payments (BoP) gap in 2026-27 (FY27).
The government exempted foreign portfolio investors (FPIs) from income tax on interest income and capital gains from government securities (G-secs), retroactive from April 1, to deepen the sovereign bond market and lure overseas investment.
Previously, FPIs and foreign institutional investors (FIIs) were taxed at 20% on securities income, with short-term gains at 30% and long-term gains at 12.5% under the Income-tax Act, 2025.
The RBI announced a concessional foreign-exchange swap facility to encourage external commercial borrowing (ECB) by public sector undertakings (PSUs) and a scheme to attract three- to five-year foreign currency retail term deposits via banks.
“While these measures are expected to strengthen our balance of payments, we will continue to make the right policy adjustments to further promote exports and attract and incentivise capital inflows,” RBI Governor Sanjay Malhotra said.
The central bank also expanded the fully accessible route (FAR) securities to include all new 15-year, 30-year, and 40-year government bonds and removed limits on short-term investment, concentration, and individual security exposure for FPIs under the general route.
Malhotra noted that these steps, combined with government tax benefits, should support foreign capital inflows for government borrowing.
The push comes amid pressure on the rupee since the West Asia conflict began in late February, with India’s external position strained by surging global crude prices after the blockade of the Strait of Hormuz.
According to economists, the combined measures could bridge the $40 billion–$50 billion BoP gap projected for FY27, assuming a 2.1% of GDP current account deficit and average crude oil prices of $90 a barrel.
