In a significant move to shore up foreign investor confidence and stabilize its currency, India on Friday announced a tax exemption for foreign institutional investors (FIIs) and the Bank for International Settlements on capital gains and interest income from government securities.

The decision, issued through an executive ordinance as Parliament is not in session, aims to draw more long-term and stable foreign capital into Indian debt markets at a time when the rupee has come under sustained pressure.

The Income-tax (Amendment) Ordinance, 2026, promulgated by President Droupadi Murmu, amends Schedule IV of the Income-tax Act to exempt specified income linked to investments in government bonds. The exemption covers both interest earned on government securities and capital gains arising from their sale, exchange, or transfer.

It will take effect from April 1, 2026, subject to conditions such as furnishing prescribed information to tax authorities.

Foreign investors currently face a 12.5% long-term capital gains tax on listed shares and bonds held for more than 12 months, along with a 20% withholding tax on interest income from government bonds. By removing these levies for eligible entities, the government hopes to improve post-tax returns and make Indian sovereign debt more attractive compared to other emerging markets.

Bond markets and the rupee showed little immediate reaction, as the move had been widely anticipated. However, analysts view it as a timely and constructive step.

Economic Backdrop: Rupee Under Strain

The exemption arrives amid mounting external pressures on the Indian economy. The rupee has depreciated more than 5% year-to-date (and over 6% according to some measures), making it one of Asia’s worst-performing currencies. This weakness stems primarily from two factors: elevated global oil prices, which have swelled India’s import bill as a major net energy importer, and significant equity outflows by foreign investors.

Data from the National Securities Depository Limited (NSDL) shows foreign investors have sold Indian equities worth $27.6 billion since the start of the year, compared with a net sell-off of $18.9 billion for the entire year 2025. These outflows, combined with higher energy costs, have weighed heavily on the currency and India’s external balances.

Krishna Bhimavarapu, APAC economist at State Street Global Advisors, described the announcement as well-timed.

“The moves easing capital inflows will help the rupee, which has been mostly falling due to the strong currency outflows. This is a step in the right direction, and the announcement has come at a very good time,” Bhimavarapu.

By targeting debt inflows rather than equity, the government is seeking more stable, longer-term capital that is less prone to sudden reversals than portfolio equity investments.

The policy reflects a deliberate strategy to broaden and deepen the investor base for Indian government securities (G-secs). India has been working to internationalize its bond market and improve its inclusion in global indices, such as JPMorgan’s Government Bond Index-Emerging Markets. Tax incentives of this nature can accelerate that process by enhancing after-tax yields for overseas investors.

Analysts expect the exemption to encourage greater participation from sovereign wealth funds, pension funds, and other long-term institutional investors who prioritize stability and predictable returns. This could help cushion the rupee against further depreciation and ease pressure on India’s foreign exchange reserves.

Furthermore, stronger foreign demand for G-secs could help moderate domestic borrowing costs over time, providing indirect support to the government’s fiscal management as it balances growth and consolidation objectives.

Challenges and Limitations

While the move is positive, its impact may be gradual. The exemption applies specifically to government securities and does not extend to corporate bonds or equities. Implementation details, including exact eligibility criteria and compliance requirements, will matter. Foreign investors will still need to navigate India’s regulatory framework, currency hedging costs, and potential shifts in global interest rate expectations.

Analysts note that the effectiveness of the measure also depends on broader macroeconomic conditions. Persistent high oil prices, global monetary policy tightening, or renewed risk aversion toward emerging markets could offset some of the benefits. Nevertheless, the announcement sends a clear signal that India is willing to use fiscal tools to support capital inflows and currency stability.

This exemption fits into a series of recent steps aimed at making India’s financial markets more attractive to global investors. These include easing foreign portfolio investment norms, simplifying compliance, and pursuing greater integration with international financial systems. In an environment of heightened global uncertainty, ranging from geopolitical tensions to volatile commodity prices, such measures help position India as a relatively stable and reform-oriented destination for capital.

For foreign investors, the tax relief improves the risk-reward profile of Indian sovereign debt, particularly when compared with other emerging markets facing similar pressures. Over time, this could contribute to a more diversified and resilient investor base for India’s debt market, reducing reliance on domestic banks and institutions.

Anthropic, the maker of the Claude AI models, has issued a pointed call for major artificial intelligence laboratories to consider a coordinated and verifiable pause in the development of the most advanced systems, cautioning that rapid progress could soon enable AI to autonomously improve itself faster than society can address the associated risks.

In a detailed blog post published on Thursday, the company highlighted the accelerating capabilities of AI agents and the looming prospect of “recursive self-improvement” — the point at which AI systems can enhance their own architecture and performance without meaningful human oversight.

“If systems are capable of fully building their own successors, the ways we secure them, monitor them, and shape their behavior all grow much more important,” Anthropic wrote. “We are not there yet, and recursive self-improvement is not inevitable. But it could come sooner than most institutions are prepared for.”

Anthropic co-founder Jack Clark and Anthropic Institute lead Marina Favaro emphasized that AI’s ability to complete complex tasks autonomously has been doubling roughly every four months. They argued that a deliberate slowdown would give society time to “deal with its immense implications.”

The proposal marks one of the most substantive calls for restraint from a leading AI lab to date. While previous appeals for pauses, including a 2023 open letter backed by Elon Musk and others, gained attention but little traction, Anthropic’s latest intervention carries added weight given its reputation for a safety-first approach and its position near the technological frontier.

The Core Concern: Loss of Control

Recursive self-improvement represents a critical threshold in AI development. Once systems can independently refine their code, training methods, and underlying architectures, the pace of advancement could accelerate dramatically beyond human ability to monitor, align, or contain potential harms. This includes risks ranging from unintended economic disruption and misinformation campaigns to more existential concerns around loss of control.

Anthropic stressed that unilateral action by a single lab would be insufficient and potentially counterproductive, as it could simply hand the lead to less cautious competitors. A meaningful pause, the company argued, would require agreement among multiple well-resourced frontier labs, clear triggering conditions, and independent oversight mechanisms.

“A unilateral pause by one lab, by contrast, is achievable immediately, but accomplishes much less: it would change who the front-runner is, but it would not create the wider deliberative process that is currently missing,” it said.

To advance the discussion, Anthropic’s research arm plans to study the institutional systems needed to support such a slowdown and will convene policymakers, researchers, civil society groups, and rival AI firms in the coming months.

Anthropic’s Safety Stance Justifies the Call

Anthropic has consistently positioned itself as one of the more cautious players in the AI race. Earlier this year, it refused to allow the U.S. military to use its models for domestic surveillance or fully autonomous weapons, a decision that led to its placement on a national security blacklist (though Reuters reported on Friday that the dispute is showing signs of easing).

Yet the company has also faced criticism for continuing to release increasingly powerful models while walking back certain safety commitments. In February, it said it would no longer hold back potentially dangerous capabilities if rivals were close to matching them.

Anthropic was recently valued at $965 billion in a major funding round and has confidentially filed for a U.S. IPO, putting it in direct competition with OpenAI (valued at over $850 billion) and Anthropic’s own reported trajectory toward nearly $1 trillion. The company’s call for a pause, therefore, comes from a position of strength rather than weakness, potentially lending it greater credibility.

Regulation in the United States has so far been limited. A recent Trump administration executive order placed the primary responsibility on labs themselves, asking them to voluntarily submit their most capable models for government cybersecurity testing before public release.

But coordinating a pause among fiercely competitive labs will be extraordinarily difficult. OpenAI, xAI, Google, Meta, and France’s Mistral — none of which immediately responded to requests for comment — are locked in a high-stakes race for talent, compute, and breakthroughs. Slowing down risks ceding ground to rivals or even to state-backed efforts in China.

Anthropic acknowledged this tension, noting that poorly coordinated action could backfire by simply shifting the frontier elsewhere. The company’s proposal for verifiable, multi-lab agreements with defined triggers represents an attempt to thread this needle.

The post also arrives amid growing public and expert concern over AI safety. Anthropic’s own Mythos model earlier this year demonstrated advanced capabilities in identifying vulnerabilities in code, sending shockwaves through sectors like banking and cybersecurity. Such demonstrations have intensified debates about whether current governance frameworks are adequate for the coming wave of more autonomous systems.

Weighing the implications, if recursive self-improvement arrives sooner than expected, the implications could be profound. Economic disruption on a massive scale, accelerated scientific discovery (both beneficial and risky), and challenges to existing power structures are all plausible outcomes. Societies may struggle to adapt to systems that evolve faster than regulatory or ethical frameworks can respond.