Context:
Foreign Portfolio Investors (FPIs) invested a record ₹55,518 crore in India’s bond market during June 2026. The surge followed the Government’s decision to remove Long-Term Capital Gains (LTCG) tax on certain bond investments, raising debate over whether these inflows will remain sustainable.
Explanation:
- Foreign Portfolio Investment (FPI) refers to investment by foreign investors in financial assets such as government securities, corporate bonds and equities, without acquiring management control.
- Debt market is the market where government and corporate entities raise funds by issuing bonds and securities, while investors earn interest.
- Government Securities (G-Secs) are sovereign debt instruments issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
- The Fully Accessible Route (FAR) allows eligible foreign investors to invest in specified Government Securities without investment limits, improving India’s bond market accessibility.
- Long-Term Capital Gains (LTCG) tax is the tax levied on profits earned from selling assets held for a specified long period; reducing or removing it can attract foreign investment.
- India’s inclusion in major Global Bond Indices, stable macroeconomic conditions, RBI policy measures and tax reforms together influence FPI inflows into debt markets.
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