India's Economic Transformation Updates

Economic Advisory Council Meeting Highlights - June 2026

1. Foreign Investment Attraction:

   • Government measures likely to attract $70 billion in foreign funds.
   • Tax removal on long-term and short-term capital gains for Foreign Institutional Investors (FIIs) in government bonds.
   • Removal of withholding tax on interest income for FIIs.

2. RBI Measures:

   • Easier mobilization of foreign deposits by banks.
   • Public Sector Undertakings (PSUs) permitted to raise external commercial borrowings.
   • Introduction of a temporary concessional forex swap facility for PSUs.
   • Revival of the Foreign Currency Non-Resident (Bank) Deposits scheme, which previously raised $26 billion during market crises.

3. Index Inclusion Impact:

   • Inclusion of Indian government bonds in the Bloomberg Global Aggregate Bond Index is crucial for attracting passive investment.
     • This will help lower the interest rates on government borrowings.
     • Anticipated inflows of $20-25 billion if inclusion occurs.
   • Recent additions of Indian debt to indices:
     • JPMorgan Emerging Market Index (June 2024).
     • Bloomberg Emerging Market Local Currency Index (January 2025).
     • FTSE Russell index (September 2025).

4. Economic Growth:

   • India’s GDP growth for Q1 2026 reported at 7.8%, surpassing expectations.
   • Full-year growth estimated at 7.7%, marginally above previously projected 7.6%.
   • Expected resilience despite external geopolitical tensions like the West Asia crisis.

5. Discussion Topics:

   • Addressing vulnerabilities to monsoon variability, particularly the anticipated impact of El Niño and sub-par rainfall forecasts by the India Meteorological Department (IMD).
   • Long-term development priorities for enhancing Ease of Living and Ease of Doing Business in India.

6. Participants in Meeting:

   • Chaired by Prime Minister Narendra Modi.
   • Includes the Economic Advisory Council members, Principal Secretaries PK Mishra and Shaktikanta Das.

Overall Significance: These government initiatives signify a strategic shift to bolster India’s economic framework and competitiveness on the global stage, responding proactively to both domestic growth impulses and external market dynamics. The anticipated foreign inflow and fiscal performance are critical determinants for India’s long-term economic stability and growth trajectory.