Foreign investors purchased a record 418 billion rupees ($4.4 billion) of Indian government bonds last month through the fully accessible route, after New Delhi eliminated withholding taxes on overseas buyers. Clearing Corp. of India data shows this marks the highest monthly inflow since the program began, signaling strong international appetite for Indian debt.

The tax break removed barriers that previously deterred foreign institutional investors from accessing India's sovereign bond market. This surge comes as global investors seek higher-yielding assets amid relatively attractive Indian yields compared to developed market bonds. The inflows demonstrate confidence in India's economic trajectory and monetary policy framework.

Previously, foreign investors faced a 5% withholding tax on bond investments, which the government scrapped to boost participation in its debt markets. The move aligns with India's broader strategy to deepen its bond market and reduce reliance on domestic banks for government financing.

At nearly double the prior record of 239 billion rupees set in August 2024, these inflows provide crucial foreign capital that supports the rupee and helps finance India's fiscal deficit while diversifying the investor base for government securities.