India has attracted more than $40 billion in foreign currency deposits from its overseas diaspora, providing an important source of financial support as the country seeks to stabilise the weakening rupee. The Reserve Bank of India (RBI) launched the scheme in June, offering attractive deposit rates and enhanced borrowing facilities to non-resident Indians in an effort to bolster foreign exchange inflows. The response has exceeded expectations, arriving at a time when higher oil prices have increased India's import bill, while persistent capital outflows have reduced foreign currency inflows, leaving the rupee among Asia's weakest-performing currencies and contributing to a third consecutive balance of payments deficit.

The inflows have strengthened the RBI's ability to manage mounting external pressures without resorting to higher interest rates. By increasing the supply of foreign currency, the scheme provides the central bank with greater flexibility to support foreign exchange reserves and cushion volatility in the rupee. However, economists caution that the initiative offers only temporary relief. This is because much of India's external vulnerability stems from structural factors, including its dependence on imported energy and increasingly volatile global capital flows, meaning short-term liquidity alone cannot resolve the underlying imbalance.

The programme demonstrates the growing economic significance of diaspora finance as a policy tool for emerging markets. India's overseas population has expanded substantially over the past decade, creating a deeper pool of capital that policymakers can mobilise during periods of financial stress. While the scheme has bought valuable breathing room for the RBI, its long-term success will ultimately depend on whether temporary inflows translate into stronger foreign exchange reserves and provide sufficient time for broader reforms to improve India's external financial resilience.

- Muthu Ramanathan

Europe's green bond market is on course for a record-breaking year, highlighting the region's continued commitment to financing the transition towards a low-carbon economy. According to the Climate Bonds Initiative, European issuers raised a record US$242 billion through green bonds during the first half of 2026, putting global issuance on track to surpass the previous annual record set in 2024. The resurgence contrasts sharply with the United States, where green bond issuance is expected to decline for a second consecutive year as political opposition to ESG investing discourages companies from explicitly marketing environmentally focused debt.

The divergence reflects contrasting political and economic priorities on either side of the Atlantic. While the Trump administration has promoted fossil fuel production and adopted a more hostile stance towards ESG initiatives, Europe has strengthened its focus on energy security following the disruption caused by the US-Iran conflict. In particular, the utilities sector has been among the largest issuers of green debt, using the proceeds to finance renewable energy and infrastructure projects. Moreover, strong investor demand has also been supported by greater regulatory clarity surrounding the European Union's green bond framework, encouraging issuers to return to the market after a slower 2025.

The rebound demonstrates that sustainable finance remains an increasingly important source of capital despite political headwinds. Green bonds allow governments and companies to raise funding specifically for environmental projects while offering investors greater transparency over how proceeds are used. As energy security, decarbonisation and climate resilience become increasingly interconnected, Europe's expanding green bond market suggests that sustainable finance will continue to play a central role in funding long-term economic growth and accelerating the global energy transition.

- Shrish Yalamarti

The Chinese government has launched a global campaign to recover billions of dollars in unpaid taxes dating back decades, as Beijing seeks to ease mounting fiscal pressures. The measures include tighter scrutiny of overseas capital gains and investments, alongside requirements for Chinese banks and financial institutions to review whether wealthy Chinese living abroad have declared their overseas income to the tax authorities. Much of the campaign targets the country's ultra-high-net-worth individuals, with investigations reportedly covering gains from assets such as real estate, precious metals and cryptocurrencies acquired more than 25 years ago. Reports also suggest that some wealthy depositors' accounts have been frozen until tax authorities are satisfied that the appropriate taxes have been paid.

What has prompted this response from Beijing? China's public finances have come under increasing strain following a prolonged property market downturn. Total government revenue fell by 1.7% in 2025, while revenue from land sales (historically one of the government's most important sources of income) declined from a peak of RMB 8.7 trillion in 2021 to RMB 4.15 trillion. In response, Beijing has introduced new tax rules on assets transferred to offshore trusts, with income generated subject to a 20% tax. In many respects, the approach brings China closer to tax systems such as that of the United States, where worldwide income is also subject to taxation.

More broadly, the crackdown highlights the difficult balance Beijing must strike between strengthening public finances and maintaining investor confidence. While stricter enforcement could boost tax revenues in the short term, it may also encourage some wealthy individuals to restructure their assets or reconsider their tax residency, increasing the risk of future capital outflows. The campaign therefore reflects not only China's determination to improve fiscal sustainability but also the growing challenges of raising revenue in an increasingly globalised financial system.

- Austin Jose

Until next time,

The Long and Short

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