FPIs pump record Rs 39,640 crore into Indian G-Secs in June so far
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims + Mains·
Why in news
Foreign Portfolio Investors (FPIs) recorded a record ₹39,640 crore inflow into Indian Government Securities (G-Secs) in June due to tax exemptions and expanded access via the Fully Accessible Route (FAR).
Background
The government and RBI exempted capital gains on eligible sovereign debt investments and expanded the FAR pool to include 30-year debt. As of June 12, India's foreign exchange reserves stood at $672 billion.
Facts for Prelims
- FactFPI inflows into Indian G-Secs reached ₹39,640 crore in June.
- FactIndia's foreign exchange reserves were $672 billion as of June 12.
- BodyCCIL (Clearing Corporation of India Limited) provides data on benchmark yields.
- S&TFully Accessible Route (FAR) allows FPIs to invest in government bonds without a limit.
- FactThe 10-year benchmark yield closed at 6.76% following the policy measures.
For Mains
Q. Analyze the significance of including Indian sovereign debt in global bond indices and its implications for India's capital account and currency stability.
Dimensions to cover in your answer
- Index Inclusion: Potential for massive capital inflows and reduced borrowing costs for the Indian government.
- Currency Volatility: Balancing the benefits of foreign capital against the risks of sudden capital outflows and rupee depreciation.
- Yield Correlation: Impact of elevated US Treasury yields on the relative attractiveness of Indian debt instruments.
Keywords: Capital Account · Sovereign Debt · Fully Accessible Route · Foreign Portfolio Investment · Bond Index Inclusion · Yield Curve
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