Sense in PM-EAC meeting: Moves to attract foreign funds can get $70 billion

📌 Summary:

• Government and RBI measures announced on Friday are likely to attract about $70 billion in foreign funds, per discussions at the Economic Advisory Council (EAC-PM) meeting chaired by PM Modi
• The Finance Ministry scrapped long-term and short-term capital gains tax, plus the withholding tax, on FII investment in government bonds; the RBI eased foreign-deposit mobilisation by banks and external commercial borrowing (ECB) by PSUs
• Mechanism: removing these taxes should accelerate inclusion of Indian sovereign debt in the Bloomberg Global Aggregate Bond Index, drawing passive flows of ~$20-25 billion over 10 months; index inclusion also lowers the Centre's borrowing costs
• Background: India was added to the JPMorgan EM index (June 2024), Bloomberg EM Local Currency Index (January 2025) and FTSE Russell (September 2025); Bloomberg deferred flagship inclusion in January, promising an update by mid-2026
• The RBI also revived the 2013 FCNR(B) deposit scheme — bearing the full exchange-rate hedging cost — which had raised $26 billion during the 2013 "taper tantrum", plus a concessional forex swap facility for PSU ECBs
• Context: better-than-expected GDP growth of 7.8% in Jan-Mar 2026; the meeting also discussed El Niño and sub-par monsoon vulnerability

🎯 UPSC Relevance: GS3 — capital flows, bond-index inclusion, rupee defence, balance of payments and external-sector management.

📝 Prelims Facts:

• EAC-PM = Economic Advisory Council to the Prime Minister
• FCNR(B) = Foreign Currency Non-Resident (Bank) deposit scheme; the 2013 version raised $26 billion
• Index timeline: JPMorgan EM (Jun 2024), Bloomberg EM Local Currency (Jan 2025), FTSE Russell (Sep 2025); Bloomberg Global Aggregate inclusion still pending

🔑 Key Term: Bond index inclusion — adding a country's sovereign bonds to a global index triggers passive fund inflows and typically lowers government borrowing costs.