Several major steps proposed by the Reserve Bank of India (RBI) and the government in June are likely to ensure that the balance of payments (BoP) deficit in India that has persisted for the past three years is changed to a minor surplus. This was mentioned in the July report issued by HDFC Mutual Fund.

As per the report of HDFC Mutual Fund, the June policy initiatives by the RBI and the government would help to turn around the third consecutive BoP deficit into a small surplus and provide relief to the rupee. As per an RBI move, the entire cost associated with hedging would be borne by the central bank for the new FCNR(B) deposits that have a tenure of three to five years until September 30, 2026. It is estimated that such a move can fetch about $40-$60 billion in foreign capital inflows into the country. $17 billion of foreign money has already been raised by means of this route till July 17, 2026. Besides, a concessional foreign exchange swap facility has been made available for ECBs of public sector undertakings. Such a move can generate additional $15-$25 billion in inflows.

According to the report, the RBI's decision to bear the full hedging cost on FCNR(B) deposits is crucial for boosting capital inflows. This facility will remain available until September 30, 2026, providing an incentive to investors. This initiative is estimated to attract potential investments worth $40 billion to $60 billion into India. By July 17, 2026, investments worth approximately $17 billion had already been mobilized under this scheme, signaling its success. Additionally, a concessional foreign currency swap facility for public sector undertakings serves as a major attraction. This facility is expected to encourage external commercial borrowings, potentially driving an additional capital inflow of $15–25 billion while simultaneously reducing hedging costs. All these measures will directly contribute to strengthening India's external sector.

The government has taken a significant decision to waive capital gains and withholding taxes on income derived from investments in government securities. This move has substantially increased the likelihood of Indian bonds being included in the Bloomberg Bond Index. Such inclusion could attract potential investments ranging from $10 billion to $20 billion over the next 12–18 months. Furthermore, the Fully Accessible Route (FAR) for government securities has been expanded, and limits on Foreign Portfolio Investment (FPI) for short-term investments have been removed. These changes will offer greater flexibility and improved access for investing in Indian government bonds, playing a crucial role in attracting foreign investors to the Indian market.

A report by HDFC Mutual Fund indicates that the rupee's depreciation over the past 12–18 months was primarily driven by weak capital inflows rather than weak economic fundamentals, as is often assumed. By May 2026, in real trade-weighted terms, the rupee was at its most undervalued level since the 2013 'taper tantrum'. The report notes that the recently announced policy measures possess significant potential to strengthen India's external sector. By supporting capital inflows, these measures will improve the balance of payments. Ultimately, these steps will alleviate pressure on the rupee, thereby strengthening its position—all of which are positive indicators for the Indian economy.

Several major steps proposed by the Reserve Bank of India (RBI) and the government in June are likely to ensure that the balance of payments (BoP) deficit in India that has persisted for the past three years is changed to a minor surplus. This was mentioned in the July report issued by HDFC Mutual Fund.

As per the report of HDFC Mutual Fund, the June policy initiatives by the RBI and the government would help to turn around the third consecutive BoP deficit into a small surplus and provide relief to the rupee. As per an RBI move, the entire cost associated with hedging would be borne by the central bank for the new FCNR(B) deposits that have a tenure of three to five years until September 30, 2026. It is estimated that such a move can fetch about $40-$60 billion in foreign capital inflows into the country. $17 billion of foreign money has already been raised by means of this route till July 17, 2026. Besides, a concessional foreign exchange swap facility has been made available for ECBs of public sector undertakings. Such a move can generate additional $15-$25 billion in inflows.

According to the report, the RBI's decision to bear the full hedging cost on FCNR(B) deposits is crucial for boosting capital inflows. This facility will remain available until September 30, 2026, providing an incentive to investors. This initiative is estimated to attract potential investments worth $40 billion to $60 billion into India. By July 17, 2026, investments worth approximately $17 billion had already been mobilized under this scheme, signaling its success. Additionally, a concessional foreign currency swap facility for public sector undertakings serves as a major attraction. This facility is expected to encourage external commercial borrowings, potentially driving an additional capital inflow of $15–25 billion while simultaneously reducing hedging costs. All these measures will directly contribute to strengthening India's external sector.

The government has taken a significant decision to waive capital gains and withholding taxes on income derived from investments in government securities. This move has substantially increased the likelihood of Indian bonds being included in the Bloomberg Bond Index. Such inclusion could attract potential investments ranging from $10 billion to $20 billion over the next 12–18 months. Furthermore, the Fully Accessible Route (FAR) for government securities has been expanded, and limits on Foreign Portfolio Investment (FPI) for short-term investments have been removed. These changes will offer greater flexibility and improved access for investing in Indian government bonds, playing a crucial role in attracting foreign investors to the Indian market.

A report by HDFC Mutual Fund indicates that the rupee's depreciation over the past 12–18 months was primarily driven by weak capital inflows rather than weak economic fundamentals, as is often assumed. By May 2026, in real trade-weighted terms, the rupee was at its most undervalued level since the 2013 'taper tantrum'. The report notes that the recently announced policy measures possess significant potential to strengthen India's external sector. By supporting capital inflows, these measures will improve the balance of payments. Ultimately, these steps will alleviate pressure on the rupee, thereby strengthening its position—all of which are positive indicators for the Indian economy.