Union Budget 2026-27 aims to court overseas individuals to bolster markets

The Union Budget proposes higher PIS limits for overseas Indians, a review of FEMA non-debt rules, and LLP reforms for AIFs, aiming to attract long-term diaspora capital and deepen capital markets

Finance Minister Nirmala Sitharaman has proposed to allow Persons Resident Outside India (PROIs) to invest in equity instruments through the portfolio investment scheme (PIS) route.

 

Industry experts said the move is likely to simplify cross-border investments. It would also attract offshore capital and expand the pool of capital available to Indian markets beyond traditional foreign portfolio investors (FPIs).

 

“PROI will be permitted to invest in equity instruments of listed Indian companies through the portfolio investment scheme. It is also proposed to increase the investment limit for an individual PROI under this scheme from 5 per cent to 10 per cent, with an overall investment limit for all individual PROIs to 24 per cent, from the current 10 per cent,” the finance minister said in her Budget speech.

 

Rohit Jain, managing partner at Singhania & Co, said the earlier tight caps often led to structuring challenges, forcing investors to opt for fragmented holdings or rely on more complex investment routes.

 

“With these restrictions now being eased, structuring investments into listed Indian companies should become significantly more straightforward,” he added.

 

Aditya Mulki, chief executive officer (CEO) of Navi AMC, said it could help offset the impact of persistent FPI outflows that have weighed on the rupee.

 

“Unlike institutional FPIs, which often exit en masse during global shocks, non-resident Indians (NRIs) tend to have a longer-term investment horizon. They could act as a cushion to FII outflows,” Mulki said.

 

The finance minister also proposed a comprehensive review of the Foreign Exchange Management (Non-debt Instruments) Rules, which could address long-standing challenges faced by foreign investors. It could also create a more contemporary, user-friendly regulatory framework.

 

In addition, the government announced proposed amendments to the Limited Liability Partnership (LLP) Act to ease compliance for alternative investment funds (AIFs), many of which are set up as trusts and face operational constraints.

 

“The request from the AIF industry has been to consider whether the LLP Act can be modified and amended to align it with the functional requirements of AIFs. That has been announced on Sunday, which is a big move forward, as becoming LLPs will limit liability. There will also be rationalisation of document filing for entry and exit of partners,” said Anuradha Thakur, economic affairs secretary, at a post-Budget press conference.

 

However, some industry participants noted that while these changes have been long demanded, they were unable to identify specific enabling provisions or detailed language in the Finance Bill or the Budget speech.

 

They added that further clarity is awaited on the scope and implementation of the proposed amendments. Even so, experts said the changes, once formalised, could improve the attractiveness of AIFs for foreign investors.