India's FPI debt inflows reached 62% of cumulative equity at $95.5 billion since FY99; $19.3 billion since FY25: Report

Foreign portfolio investment (FPI) debt inflows have accounted for 62 per cent of cumulative equity inflows into India since FY 1998-99, marking the growing importance of the country's debt market in attracting foreign capital, according to a report by DSP Mutual Fund. India has received $95.5 billion in FPI debt inflows in about 28 years, compared with $154.4 billion in equity inflows.

The report said debt inflows have gained momentum following India's inclusion in global bond indices and the introduction of the Fully Accessible Route (FAR) for government securities. Since FY25, India has received around $19.3 billion in FPI debt inflows, of which $11.8 billion came through the FAR route.

DSP Mutual Fund said India is well-positioned to attract further debt inflows, with real government security yields currently above 2 per cent and the country's broad real effective exchange rate (REER) below 90. The report added that foreign investors have historically preferred markets offering positive real yields, stable currency expectations and easier market access.

DSP Mutual Fund also said that, "Removal of capital gains tax can improve access further — making FAR a quasi-open, tax-efficient window for global investors. At a time of weak equity FPI flows and FDI outflows, debt flows can help bridge the current account deficit and reduce rupee pressure."

According to the report, debt inflows could also help support India's external sector at a time when equity FPI flows remain weak and foreign direct investment (FDI) outflows have put pressure on the capital account. It said debt inflows can help bridge the current account deficit and reduce pressure on the rupee.