Govt announces measures to attract foreign capital

In a move to bolster its capital account and solidify its standing as a premier global investment destination, the Indian government has unveiled a series of measures designed to attract foreign capital. These initiatives, announced Friday, target both individual foreign investors and institutional portfolio investors. Significant changes include liberalizing investment rules for individuals residing outside India (PROIs). They will now be permitted to invest in equity instruments of listed Indian companies through the portfolio investment scheme, previously accessible only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). Furthermore, the investment limit for individual PROIs in any company will increase from 5% to 10%, with the overall limit for all individual PROIs rising to 24% from the current 10%. The government has also eased the regulatory framework for Foreign Portfolio Investors (FPIs) engaging with government securities. Restrictions concerning short-term investment limits, concentration limits, and security-wise limits for FPIs under the general route have been removed, while the overall quantitative investment limit of 6% of the outstanding stock of central government securities remains in place. These reforms are intended to make foreign investment in equities and government securities more accessible, efficient, and globally competitive. The Union finance ministry stated that the measures aim to attract stable, long-term foreign capital flows, which are crucial as India navigates current economic pressures, including potential impacts on software services exports from AI and geopolitical developments.

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This notification will facilitate a more proactive mobilisation of foreign portfolio capital by leveraging the existing onboarding systems already in place for NRI/OCI investors. Simplified onboarding and reduced compliance requirements would further enhance ease of doing business, while attracting a broader base of relatively stable individual foreign investors. This will also support greater and more stable foreign inflows into Indian equity markets.