India Opens Doors Wider for Global Investors

The Government of India has announced sweeping reforms to attract more foreign investment into Indian equities and government securities (G-Secs). These include higher limits for overseas investors, tax exemptions on G-Sec returns, and easier rules for long-term foreign capital. The changes aim to make India’s markets more globally competitive while boosting foreign exchange inflows.

Key Reforms Announced

• Higher Equity Investment Limits: Individual foreign investors (PROIs) can now invest in Indian listed companies under the Portfolio Investment Scheme. Limit raised from 5% to 10% per company, with an overall cap of 24% (up from 10%).
• Expanded G-Sec Access: FPIs can now invest in 15-, 30-, and 40-year government securities. Sovereign Green Bonds also included under the Fully Accessible Route (FAR). Restrictions on short-term, concentration, and security-wise limits removed.
• Tax Exemptions on G-Secs: From April 1, 2026, FPIs will be exempt from income tax on interest and capital gains from G-Secs. Similar exemption extended to the Bank for International Settlements (BIS).

Why This Matters for India

• Boosts foreign capital inflows: Pension funds, insurance firms, and sovereign wealth funds are expected to invest more.
• Strengthens financial markets: A smoother yield curve and deeper G-Sec market will improve India’s debt profile.
• Global competitiveness: Simplified rules and tax exemptions make India comparable to leading financial hubs.

At a Glance

Reform	Old Rule	New Rule	Impact
Equity investment by PROIs	5% per company, 10% overall	10% per company, 24% overall	Wider foreign investor base
G-Sec access	Limited tenors, restrictions	15-, 30-, 40-year G-Secs + Green Bonds	Long-term capital inflows
Tax on G-Secs	Taxable interest & gains	Exempt from April 1, 2026	Attracts global investors

Implications for the Masses

• Indian companies: May see more foreign investment, boosting stock prices and liquidity.
• Government borrowing costs: Could reduce as more investors buy long-term bonds.
• Ordinary citizens: Benefit indirectly through stronger markets, more stable rupee, and better access to foreign capital for infrastructure and growth.