India's Foreign Investment Reforms Aim to Stabilize Capital Account, Strengthen Rupee

India has unveiled a package of foreign investment reforms designed to enhance capital account stability, bolster the rupee, and improve liquidity and price discovery within the government securities market. The measures, announced Friday, broaden investment avenues for foreign individuals and portfolio investors in Indian equities. Simultaneously, government bonds have been made more appealing through tax concessions.

Complementing these fiscal adjustments, the Reserve Bank of India (RBI) has introduced monetary measures. These include subventions on hedging costs for external commercial borrowings, aimed at stimulating foreign exchange inflows and providing support to the rupee. Officials noted the well-coordinated and timely policy responses from both the finance ministry and the RBI, highlighting their agility in addressing a volatile global economic climate.

This coordinated approach was reflected in the rupee's appreciation, closing at 95.18 against the US dollar on Friday, a gain of 56 paise. The positive impact is anticipated to persist. The robustness of the Indian economy was further underscored by GDP figures released the same day, showing a 7.7% growth for the fiscal year 2025-26, cementing India's position as the world's fastest-expanding major economy. Fourth-quarter GDP growth stood at 7.8%.