Foreign portfolio investors (FPIs) have invested approximately ₹35,000 crore in Indian government bonds so far this month, marking a significant surge in foreign demand for Indian sovereign debt.
The inflow follows the Indian government’s recent decision to exempt FPIs from income tax on interest income and capital gains arising from bond investments.
This policy shift has effectively removed a major friction point for international capital, boosting holdings under the Fully Accessible Route.
The repricing of Indian bonds reflects a broader shift in sentiment toward emerging market debt.
With the tax barrier eliminated, Indian gilts have become more competitive relative to other frontier and emerging market sovereigns.
The volume of ₹35,000 crore in a single month underscores the depth of pent-up demand among global asset managers who had previously been deterred by the withholding tax structure.