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7 July 2026

Foreign investment in Indian bond market

The topic involves specific government policy interventions like the Fully Accessible Route (FAR) and tax reforms aimed at capital account management and resource mobilization, which are core themes in the GS3 economy syllabus.

1 min read Day 2 of 3 2 questions 1 prelims

Notes

  • Foreign Portfolio Investment (FPI) in Indian bond markets reached a record ₹55,518 crore in June 2026.
  • The Centre waived Long Term Capital Gains (LTCG) tax on foreign investment in bonds to attract long-term institutional investors.
  • The Fully Accessible Route (FAR) was expanded to include 15-year, 30-year, and 40-year Government Securities and Sovereign Green Bonds.
  • FPI inflows into debt securities in June 2026 offset a significant equity outflow of ₹49,340 crore.
  • FAR recorded an inflow of ₹21,652 crore in June 2026, the highest since its introduction in September 2024.
  • Experts suggest that while tax incentives act as a catalyst, core macroeconomic fundamentals, policy consistency, and external conditions remain the primary drivers of capital flows.
  • Factors supporting recent bond market sentiment include easing geopolitical tensions in the Strait of Hormuz and potential inclusion in the Bloomberg Global Aggregate Bond Index.
  • The Ministry of Finance states that these reforms aim to strengthen financial market resilience and boost foreign exchange inflows.

Part of a longer story

This is day 2 of 3 in Foreign Portfolio Investment in Indian debt markets, which has been running since 30 June 2026. Reading it whole is usually worth more than reading today alone — the exam asks how something developed.

Questions

  1. Analyze the role of the Fully Accessible Route (FAR) in deepening India's debt market and its impact on attracting long-term institutional investors. 150 words
    Attempt this — 150 words in 8 min
    0 / 150 words 8:00
  2. To what extent can fiscal policy measures, such as the waiver of capital gains tax on bonds, influence foreign capital inflows compared to macroeconomic fundamentals and global geopolitical stability? 250 words
    Attempt this — 250 words in 11 min
    0 / 250 words 11:00

Prelims

  1. Which of the following instruments were recently included under the Fully Accessible Route (FAR) for foreign investment?

Syllabus

Topics

Sources

250words.in · https://250words.in/daily/2026-07-07/foreign-investment-in-indian-bond-market