FM Nirmala Sitharaman hints at more steps to attract foreign capital
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Finance minister Nirmala Sitharaman today said the government may take more steps to attract foreign capital in the country.
"Withholding tax treatment, which we have offered, will be the first step towards drawing some capital back. At the moment, it is confined to the bond market. But that's not the end of the story. We will be doing more," FM said at the Mindmine summit in New Delhi today.
FM Sitharaman said the government recognizes that India needs more foreign capital to come in.
"The RBI has now allowed public sector undertakings and banks to go out and pick money and given them a framework to do so. The banks can now go unfettered to raise capital from outside. So, we have taken a calibrated approach to make sure that the market do receive the required investments," the finance minister said.
On June 5, the government issued an ordinance scrapped long-term capital gains tax on investments made by foreign institutional investors (FIIs) in government securities.
The government's decision to exempt foreign institutional investors (FIIs), including foreign portfolio investors (FPIs), from tax on interest income and capital gains earned from investments in government securities is expected to enhance the attractiveness of Indian sovereign bonds and support long-term foreign capital inflows.
The exemption, introduced through an Ordinance and effective from April 1, 2026, removes taxes on interest income as well as gains arising from the transfer or redemption of government securities.
The decision came at a time when foreign investors have pulled out nearly ₹2.6 lakh crore from Indian equities so far in 2026, significantly higher than the ₹1.66 lakh crore withdrawn during the whole of 2025, amid escalating geopolitical tensions. In the first three trading sessions of June alone, foreign investors offloaded equities worth around ₹34,000 crore, adding further pressure on the rupee.
On El Nino, Sitharaman said monsoon is a challenge every year but this year because of the El Nino, we are preparing for a not so good monsoon. "Of course, we have buffer stocks which we have maintained since last year and there won't be a food shortage," Sitharaman said.