India’s overall Balance of Payments is projected to run a deficit of $28 billion in FY27, with the current account gap widening to $54.1 billion – roughly 1.3% of GDP. It would be the third consecutive year in negative territory. Meanwhile, the rupee has depreciated around 6% so far in 2026 and about 11% over the past twelve months, while foreign exchange reserves have fallen by roughly $38 billion from their February 2026 peak of $728.49 billion.
The government has already moved on import duties – gold and silver levies were raised from 6% to 15% – but people in the know of discussions at the government level indicate that two further options are now in active consideration.
Option 1: Tightening the Liberalised Remittance Scheme
Currently, Indian residents can remit up to $250,000 abroad every year under the Liberalised Remittance Scheme (LRS). But policymakers are reportedly examining whether that ceiling – or limits for specific categories within it- should be cut back.
A targeted reduction focusing on non-essential categories could contain more than $22 billion in annual outflows, without affecting essentials such as overseas medical treatment and education, explained a person in the know.
“About 75–77% of LRS outflows are classified as non-essential- foreign travel, gifts, overseas equity, property purchases. International travel alone accounts for more than half of total outward remittances. If we do what we did in 2013 can cut all non-essential LRS out, we are looking at $22-23 billion of outflows staying in India.”
“There is a clear 2013 playbook here. During the taper tantrum, the RBI cut the LRS limit from $200,000 to $75,000 to curtail outflows. A similar proportional reduction today from $250,000 to $75,000 could yield comparable results, though the economic and political contexts are quite different,” this person added.
Option 2: Concessional tax for foreign bond investors
The second lever involves making Indian government securities more attractive to foreign capital through tax rationalisation. Under Section 194LD of the Income Tax Act, foreign investors once enjoyed a concessional TDS rate of 5% on interest earned from Indian government bonds. That benefit expired in July 2023, and the rate reverted to 20%.
Sources say there is now a view within the government that restoring a stable, lower tax rate would encourage long-term global investors to buy Indian government securities directly, especially as India deepens its integration into global bond indices.
Option 3: A diaspora deposit scheme: the harder bet
A third option- mobilising funds from the Indian diaspora through a special deposit scheme- is also part of the broader discussion, though considered tougher to execute in the current global rate environment.
The challenge this time: US interest rates remain significantly higher than in 2013, making dollar-denominated returns outside India considerably more attractive for NRIs. Any scheme would need to offer a meaningful premium to compete- raising the cost of the capital raised.
India has used this tool several times in the past.
1998: Resurgent India Bonds; raised significant inflows during the Pokhran sanctions fallout
2000: India Millennium Deposits, tapped NRI savings at a moment of global uncertainty
2013: FCNR(B) scheme, mobilised over $26 billion in foreign currency deposits during the taper tantrum
India’s policymakers are working against a tightening window. With the BoP projected negative for a third consecutive year and the rupee continuing to slide, the pressure to act is mounting. Which of these tools, alone or in combination, get deployed will depend on how the macro picture evolves in the weeks ahead.
