India is considering a set of measures aimed at attracting more foreign investment as the ongoing Iran war continues to create pressure on the country's economy, according to reports citing government sources.

One of the key proposals under discussion is the removal of capital gains tax on investments made by foreign portfolio investors (FPIs) in government securities.

The move comes at a time when geopolitical tensions in West Asia have pushed up global oil prices, weakened investor sentiment and increased pressure on the Indian rupee. India, which imports a significant share of its crude oil requirements, has been among the countries closely monitoring the economic fallout from the conflict.

Government exploring ways to boost capital inflows

Officials are reportedly evaluating tax-related incentives to make Indian debt markets more attractive to overseas investors. The proposed exemption on capital gains from government securities is aimed at encouraging foreign portfolio investment and supporting capital inflows during a period of heightened global uncertainty.

The government is seeking to counter the impact of foreign capital outflows that have intensified amid concerns over the Iran conflict and its implications for energy markets and global economic growth.

Rupee and markets under pressure

Recent weeks have seen increased volatility in financial markets, with foreign investors pulling money out of Indian equities. Analysts have linked part of the pressure on the rupee to rising oil prices and continued overseas investor withdrawals.

Market participants believe that measures aimed at attracting foreign investment into government securities could help improve investor confidence and provide support to the domestic currency.