Despite energy prices remaining elevated due to the war in West Asia, the government is confident the economy has continued to perform well in the ongoing April-June quarter, with the high growth seen in January-March spilling over into the new fiscal year that started in April, a senior official told The Indian Express on the condition of anonymity. Further, the tax cuts announced last week for Foreign Institutional Investors’ (FIIs) investments in government bonds were squarely aimed at accelerating India’s inclusion in the Bloomberg Global Aggregate Bond Index, with the source adding that more steps will continue to be taken to attract foreign inflows. There was no elaboration of the measures that would be taken.
“The feedback that we are getting from industry and banks is that growth from the fourth quarter has continued into April-June and it is reflecting in economic data,” the official said. “Be it cement, production of cars, Fast Moving Consumer Goods, and even consumer durables, there is clear indication that growth is sustaining despite the problems emanating from outside India.”
“Even GST collections, the revenue from imports has jumped almost 20%. And this is not because consumer goods are being imported in huge numbers – it is intermediate goods, machinery, inputs that industry uses that are being purchased from abroad,” the source added.
Data released last week showed the Indian economy ended 2025-26 on an unexpectedly strong note, with the GDP estimated to have grown 7.8% in January-March on the back of higher growth in investments despite the war overlapping with the final month. For the year as a whole, India’s GDP has been estimated to have increased by 7.7%, higher than the statistics ministry’s second advance estimate of 7.6%, announced in February. India’s GDP growth in 2024-25 was 7.1%. Moreover, while overall Goods and Services Tax collections rose only 3% year-on-year in May, that from imports surged 19.1%. Further, industrial growth rose to 4.9%, with manufacturing sector growth at 6.2%.
Meanwhile, the Reserve Bank of India on Friday lowered its GDP growth forecast for 2026-27 by 30 basis points (bps) to 6.6%, with the Monetary Policy Committee noting that prolonged global supply chain disruptions, heightened volatility in global financial markets, and weather-related shocks “continue to pose downside risks to the domestic growth outlook”.
According to the aforementioned source, the RBI’s downward revision to the growth forecast is understandable. “The RBI needs to be conservative, and that’s what it has done. And that’s OK.”
“The government has taken measures to help affected areas: there is the maritime insurance pool, the ATF Price Stabilisation Fund, and the Budget announced the Economic Stabilisation Fund… We are recognising where the pressures are and acting to ease them.”
Bloomberg index inclusion
On Friday, the government and the RBI announced a host of steps to attract foreign capital – from the scrapping of capital gains and withholding tax on FII investment in government debt to concessional windows to boost foreign currency deposits and loans – with The Indian Express reported Sunday that the Economic Advisory Council to the Prime Minister, at its meeting on Saturday, thinks the measures may pull around $70 billion over a period of time.
According to the government source, the removal of the tax on long-term and short-term capital gains as well as the withholding tax on investment by FIIs in government bonds was to push India’s case to get included in the Bloomberg Global Aggregate Bond Index.
“The current treatment of interest and capital gains income earned by FIIs reduces the effective post-tax yield on government securities relative to comparable sovereign instruments in peer emerging markets, many of which are already index constituents. Addressing this structural disadvantage is necessary to make government bonds genuinely competitive in the global sovereign debt market,” the source said, adding that becoming part of the index would “unlock a substantial and predictable pool of passive capital flows”.
In mid-January, Bloomberg Index Services Ltd (BISL) had deferred the inclusion of Indian government bonds into its flagship global index, saying it will provide another update by mid-2026, noting that while its feedback survey from clients indicated broad support for the long-term trajectory of the Indian government bond market and for its potential eventual inclusion, there were “important operational and market-infrastructure considerations that merit further evaluation”.
In recent years, Indian government debt has been added to multiple global bond indices, starting with JPMorgan adding India to its emerging market index beginning June 2024. Subsequently, Bloomberg included India in its Emerging Market Local Currency Index from January 2025 and FTSE Russell to a similar one from September 2025. On Sunday, The Indian Express reported, quoting a bond market participant, that the Bloomberg index inclusion “is on the verge of happening”.
Economists think the addition of Indian sovereign debt into the Bloomberg Global Aggregate Bond Index could lead to inflows of $20 billion-$30 billion over 10 months.
FII tax cuts aimed at Bloomberg index inclusion: Govt source 
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