ECONOMIC ADVISORY COUNCIL TO THE PM
Why in News?
On 6 June 2026, Prime Minister Narendra Modi chaired a meeting of the Economic Advisory Council to the Prime Minister (EAC-PM) to discuss measures for sustaining India’s economic growth amid global uncertainties.
FOCUS OF THE MEETING
- Sustaining high economic growth.
- Attracting foreign capital.
- Strengthening structural reforms.
- Assessing risks from the West Asia conflict.
- Addressing challenges posed by El Niño.
- Improving Ease of Doing Business (EoDB) and Ease of Living.
WHAT IS EAC-PM
- The Economic Advisory Council to the Prime Minister (EAC-PM) is an independent advisory body that provides economic advice to the Prime Minister on key policy issues.
Nature of EAC-PM
- Non-Constitutional Body
- Non-Statutory Body
- Non-Permanent Body
- Constituted through an Executive Order
Present Chairman
- Mahendra Dev
FUNCTIONS
The Council performs the following functions:
Economic Policy Advice
- Advises the Prime Minister on economic matters.
- Suggests policy interventions.
Macroeconomic Assessment
- Reviews growth trends.
- Assesses inflation, investment and employment conditions.
Risk Evaluation
- Studies domestic and global economic risks.
- Suggests mitigation measures.
Reform Recommendations
- Recommends reforms for sustainable and inclusive growth.
Development Planning
- Provides inputs regarding long-term development priorities.
MAJOR ISSUES DISCUSSED
1. Sustaining India’s Growth Momentum
The Council emphasized maintaining India’s growth trajectory despite global challenges.
Areas of Focus
- Economic Transformation
- Structural Reforms
- Investment-led Growth
- Macroeconomic Stability
- Ease of Doing Business
- Ease of Living
Objective
- To ensure that India remains one of the fastest-growing major economies despite global uncertainty.
2. Measures to Boost Foreign Capital Inflows
- The government announced several measures to attract foreign investment into India.
Tax Relief for Foreign Institutional Investors (FIIs)
Removal of Short-Term Capital Gains Tax (STCG)
- No STCG tax on investments in Government Securities.
Removal of Long-Term Capital Gains Tax (LTCG)
- LTCG tax also removed on such investments.
Removal of Withholding Tax
- Interest income from Government Securities exempted from withholding tax.
Expected Benefits
- Greater investor confidence.
- Higher foreign investment.
- Improved market liquidity.
- Lower borrowing costs.
3. RBI Measures to Support Capital Inflows
- The Reserve Bank of India (RBI) introduced complementary measures.
Easier Foreign Currency Deposits
- Relaxation of norms for mobilising foreign currency deposits.
Revival of FCNR(B) Scheme
- FCNR(B) = Foreign Currency Non-Resident (Bank) Deposit Scheme
Under this scheme:
- NRIs can maintain foreign currency deposits.
- RBI bears exchange-rate hedging costs.
Forex Swap Facility for PSUs
Provided temporary concessional forex swap facility for:
- Public Sector Undertakings (PSUs)
- Raising External Commercial Borrowings (ECBs)
Potential Foreign Capital Inflows
Estimated Inflows
- The combined impact of government and RBI measures may attract Nearly $70 Billion of foreign capital inflows.
ROLE OF GLOBAL BOND INDICES
Why Bond Index Inclusion Matters?
When a country is included in major bond indices:
- Global funds automatically invest.
- Demand for government bonds increases.
- Bond yields fall.
- Borrowing costs decline.
INDIA’S RECENT INCLUSION IN GLOBAL BOND INDICES
| Bond Index | Inclusion Date |
| JPMorgan Emerging Market Bond Index | June 2024 |
| Bloomberg Emerging Market Local Currency Index | January 2025 |
| FTSE Russell Emerging Market Bond Index | September 2025 |
BLOOMBERG GLOBAL AGGREGATE BOND INDEX
Significance
India’s inclusion could bring:
- $20–25 Billion additional inflows.
- Greater demand for Government Securities.
- Lower borrowing costs.
- Deeper integration with global financial markets.
ASSESSMENT OF GLOBAL RISKS
1. West Asia Conflict
The Council reviewed the implications of the ongoing conflict in West Asia.
Key Concerns
- Energy security.
- Crude oil prices.
- Global trade routes.
- Financial market stability.
Assessment
- No major immediate threat was identified, but developments continue to be monitored.
2. El Niño and Monsoon Risks
Why Important?
- El Niño can weaken India’s monsoon.
Possible Impact
- Lower agricultural output.
- Reduced rural incomes.
- Food inflation.
- Slower economic growth.
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