FPIs Pour Record Funds into Indian Government Bonds Following Policy Shift

Foreign Portfolio Investors (FPIs) are flooding the Indian government securities market with unprecedented capital, driven by transformative regulatory reforms. Recent policy shifts designed to simplify investment processes and enhance tax efficiency have triggered a massive surge in inflows through the Fully Accessible Route (FAR).

Massive Surge in FPI Inflows via the Fully Accessible Route

The scale of foreign investment in Indian government bonds has seen an astronomical jump this month. According to data from the Clearing Corp of India, FPIs have invested ₹33,000 crore in June so far, representing a six-fold increase compared to the ₹5,512 crore invested in May. To put this momentum into perspective, the previous high for this category over the last year was ₹12,246 crore, recorded in October.

This surge is largely attributed to the government’s decision on June 5 to remove several restrictive barriers. By eliminating short-term investment limits, concentration limits, and security-wise limits, the government has effectively streamlined the entry for global capital. Furthermore, the merger of 'general' and 'long-term' sub-categories into single limits for central and state securities has simplified the operational landscape for foreign investors.

Tax Reforms and Expanded Investment Universe

A critical driver behind this record-breaking inflow is the significant enhancement of post-tax returns for FPIs. The government has removed several tax burdens that previously acted as deterrents. Previously, FPIs were subject to a 12.5% long-term capital gains tax on listed shares and bonds held for over 12 months, along with a 20% withholding tax on interest earned from government bonds.

Beyond taxation, the scope of investable assets has widened. The "Fully Accessible Route" now includes tenors of 15, 30, and 40 years, as well as sovereign green bonds. This expansion, combined with a stable rupee and a calmer geopolitical environment, has bolstered investor sentiment, bringing "sideline" capital into the Indian debt market.

The Road Ahead: Global Indices and Macro Factors

اگرچہ موجودہ رفتار تاریخی ہے، لیکن مارکیٹ کے ماہرین کا کہنا ہے کہ طویل مدتی پائیداری کا انحصار وسیع تر میکرو اکنامک استحکام اور عالمی انضمام پر ہے۔ تجزیہ کاروں کے مطابق، بھارتی حکومتی قرضوں (sovereign debt) کو Bloomberg Global Aggregate Index جیسے بڑے عالمی بانڈ انڈیکس میں شامل کرنے کا امکان ایک اہم آنے والا محرک ہو سکتا ہے۔ ایسی شمولیت سے ساختی فائدہ حاصل ہوگا اور پیسو ان فلو (passive inflows) کا ایک مستقل سلسلہ یقینی بنایا جا سکے گا۔

مزید برآں، ایسی رپورٹیں ہیں کہ ریزرو بینک آف انڈیا (RBI) اور وزارت خزانہ مزید سرمایہ کاری کو فروغ دینے کے لیے بینک فار انٹرنیشنل سیٹلمنٹس (BIS) کے ساتھ رابطہ کر سکتے ہیں۔ خاص طور پر، حالیہ ریگولیٹری تبدیلیوں میں BIS کو خصوصی ٹیکس چھوٹ کا درجہ دیا گیا ہے، جو بھارت کو بڑے ادارہ جاتی سرمایہ کاروں کے لیے بین الاقوامی معیارات کے مطابق لاتا ہے۔

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