The tax break may boost the returns for foreigners by 15%-20%, according to Deloitte India.

Global funds are piling into Indian government bonds after New Delhi removed taxes on debt for foreign investors and eased ownership caps, along with moves that have helped stabilise the rupee.

Overseas flows into index-eligible bonds have increased by ₹32,630 crore ($3.5 billion) since the June 5 reforms, according to latest available Clearing Corp of India data, though part of the increase reflects the addition of more bonds to the category. Pictet Asset Management and Neuberger Berman Group LLC said they’re looking to add exposure, while M&G Investments has turned more positive after the latest steps.

“India now looks better differentiated from other emerging bond markets, where policy flexibility and credibility are more constrained,” said Low Guan Yi, head of Asia fixed income at M&G Investments in Singapore. 

Earlier this month, New Delhi scrapped taxes and removed limits on the ownership of some bonds for global funds. The central bank also said it will subsidise hedging costs for non-resident deposits and offshore borrowings by companies. The measures came after the rupee fell to record lows amid pressure from higher energy prices and record equity market outflows.

The tax break may boost the returns for foreigners by 15 per cent-20 per cent, according to Deloitte India.

India’s efforts to draw foreign capital contrast with responses elsewhere in Asia, where policymakers have relied more on interest rate hikes to support the currency. Bank Indonesia undertook a surprise rate hike last week and announced plans to intensify interventions to shore up the rupiah, while authorities in the Philippines warned speculators betting against the peso after previously raising rates to curb inflation.

“We see scope for increased allocation as India offers a relatively high-yielding, lower-beta alternative to some other EM markets,” said Carrie Liaw, senior investment manager for emerging market fixed income at Pictet Asset. 

The measures have helped the rupee recover the record low of near 97 per dollar hit last month. On Thursday, the currency rose for a fifth day, marking its longest winning run in a year. They have also boosted the prospects of eventually getting the securities cleared and settled through Euroclear, a move that would make India’s onshore debt market easier for foreign investors to access, according to Prashant Singh, senior portfolio manager at Neuberger. 

Not all investors are ready to consider raising exposure immediately.

“While it is positive in the medium to long term, heightened Middle East risks remain a hurdle for now, though will create buying opportunities over the next few months,” said Kenneth Akintewe, head of Asian sovereign debt at Aberdeen Investments.

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Published on June 19, 2026