Overview
- The Finance Ministry is reviewing an RBI-backed plan reported Thursday to cut taxes for foreign holders of government bonds, which helped the rupee pare losses and nudged the 10-year yield near 7.03%.
- Non-residents now face about 20% tax on interest after a 5% concession ended in 2023, and this withholding tax is taken from coupon payments before investors are paid.
- Foreign investors hold only about 3% of India’s roughly $1.3 trillion sovereign debt, even though government securities are now included in major JPMorgan and FTSE Russell bond indices.
- The rupee has fallen more than 6% this year and touched a record low near 95.96 per dollar as higher oil prices linked to the Iran conflict raise India’s dollar import bill.
- Officials and analysts are split on the plan’s impact, with some warning that inflation and recent heavy currency-market interventions could blunt its effect, and there is no formal decision yet.