Budget 2026-27 hikes investment limits for persons resident outside India in a bid to boost FDI, FII inflows

At present, a person resident outside India may hold foreign investment either as Foreign Direct Investment (FDI) or as Foreign Portfolio Investment (FPI) in any particular Indian company, with the investments subject to the entry routes, sectoral caps or the investment limits as defined in the FEMA regulations. With these measures, capital inflows are expected to receive a boost. “Ease of Doing Business is strengthened as persons resident outside India are permitted to invest in listed equities via the portfolio route. Doubling the individual cap to 10% and raising the aggregate limit to 24% will deepen markets and also boost FDI inflows,” said Sanjay Kumar, Director – Nangia Global Advisors LLP.

The Economic Survey 2025-26, presented on Friday, had flagged the global capital strike, and its adverse impact on the rupee’s stability, despite strong macroeconomic fundamentals. It had said the rupee is “punching below its weight”, with the rupee’s valuation does not accurately reflect India’s “stellar economic fundamentals”, which causes investors to pause. While an undervalued rupee helps offset the impact of higher US tariffs, the investor reluctance to commit to India warrants examination, the Survey had said. Capital flight, including with the advent of the US stablecoins, is a risk to watch out for, it had said.

Amit Maheshwari, Managing Partner, AKM Global, a tax and consulting firm said the existing Portfolio Investment Scheme under FEMA allows non-resident individuals to buy and sell shares or convertibles of listed Indian companies through a dedicated NRE PIS (non-resident external portfolio investment scheme) demat account with designated bank branches, requiring single-transaction reporting and end-of-day Reserve Bank of India (RBI) uploads while adhering to sectoral caps. “Earlier, the non-Indian nationals registered as FPIs with SEBI via custodians — complex KYC, net worth thresholds, higher costs — or invested indirectly via offshore funds or exchange traded funds or GIFT City vehicles. The Budget announcement eliminates FPI registration hurdles for direct retail access, cuts compliance costs/time, boosts market liquidity/depth, reduces classification disputes for companies, and channels more diverse foreign inflows without diluting control safeguards,” he said.

The Survey had said FDI inflows remain below their potential, especially for infrastructure needs, despite a clear government intent and proven economic management, listing several cross-country examples of tax holidays, customs exemptions, investment missions, tailor-made tax incentives, low-interest loans, visa concessions, R&D tax incentives, project approvals with interventions at the PM level in the emerging FDI destinations of Vietnam, Thailand, Malaysia, Taiwan, and Australia as FDI attracting measures. Creating a task force to engage top global companies and promote India’s advantages — stability, macroeconomic strength, sustained growth and market size — could boost FDI, especially in targeted sectors, it had said.