New Delhi [India], June 5 (ANI): The Centre's decision to exempt foreign institutional investors (FIIs) from interest tax on investments in government securities (G-Secs) is a positive policy measure that could help attract overseas capital and support the rupee over the medium term, according to Rahul Bajoria, Chief Economist for India at Bank of America (BofA).

Speaking exclusively to ANI, Bajoria said the move addresses a long-standing demand from market participants and reflects policymakers' efforts to improve investor sentiment amid global uncertainty.

'I think this has been a longstanding ask from many participants in the market,' Bajoria said.

His comments came after the government issued an ordinance on Friday exempting FIIs from tax on interest income earned from investments in government securities, a move aimed at enhancing the attractiveness of Indian debt markets.

However, Bajoria cautioned against expecting an immediate turnaround in foreign capital flows.

'These measures are not just for this week or next week. I think they will serve us well over the next few years, and so I believe these are very positive steps,' he said.

'But their impact is not necessarily going to show up in the next few days. I would wait for the next few months and quarters for the effects to really come through,' he added.

Referring to the Reserve Bank of India's (RBI) monetary policy announcements, Bajoria said the central bank's accompanying measures aimed at supporting financial markets and the currency demonstrate that policymakers still have tools available to attract capital inflows.

'What it does is showcase that there are policy options available to try and attract money back into the country,' he said.

Commenting on the RBI's revised growth projections, Bajoria said the central bank's estimates appear realistic given the uncertain global environment.

'We ourselves are expecting growth to be around 6.5 per cent. So it's close to where we were already a couple of months ago,' he said.

'We live in unprecedented times, and from that perspective, I think the numbers look quite realistic. Hopefully, we will be able to achieve 6.5 per cent growth in the current fiscal year, notwithstanding the supply-side challenges,' he added.

On the rupee outlook, Bajoria said the currency has already reacted positively to the latest measures, although global pressures on emerging market currencies remain elevated.

'Our sense is that global pressures on emerging market currencies are likely to remain high in the near term. From that perspective, the bias could be for the rupee to remain under some pressure,' he said.

He added that a resolution to the conflict in West Asia could ease pressure on the currency through lower oil prices.

'If the conflict were to be resolved, you might see oil prices come down. That would take a lot of pressure off the currency, at least in the near term,' Bajoria said. (ANI)