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India

Foreign investors pull back from Indian debt and equities, sparking tax debate

Slower but continued foreign outflows from Indian assets are renewing calls for tax changes to attract portfolio capital back to the market.

Photo: Bloomberg

What happened

Foreign portfolio investors sold Rs 5,400 crore of Indian government securities under the fully accessible route in October, about 49% less than in September. The Economic Times Foreign selling of Indian assets slowed in October, with equity sales easing marginally compared with the previous month. The Economic Times Foreign portfolio investors have taken out about $51 billion from Indian equity markets since 2024-25. The Indian Express This outflow has prompted a clamour for a review of the existing long-term capital gains tax regime. The Indian Express+1

Around it

High oil prices, elevated global yields and uncertainty around artificial intelligence investments are cited as factors that cloud the prospects of a sustained revival in portfolio flows. The Economic Times Economists caution that the October slowdown may not signal a definitive change in foreign investment trends. The Economic Times Outward remittances under the liberalised remittance scheme have crossed $20 billion in the first eight months of 2026, and proposals to curb such outflows have been criticized as a step backwards. The Indian Express

Sources

  1. The Economic TimesFPI G-Sec outflows nearly halve to Rs 5,400 crore in October
  2. The Indian ExpressTo ease capital inflows, start with a friendlier tax regime
  3. BloombergIndia’s $49 Billion Foreign Fund Exodus Fuels Tax Debate

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