More measures on anvil to attract global flows, says FM Sitharaman

Sitharaman says govt working to make investments more attractive

Finance Minister Nirmala Sitharaman on Monday said more steps will be taken to attract foreign capital into India, indicating that recent measures announced for the bond market were only the beginning of a broader initiative to boost investment inflows.

 

Speaking at the Hero Mindmine Summit 2026, Sitharaman said the Centre recognised the need for greater foreign capital and was working with the Reserve Bank of India (RBI) in this regard. 

Government has taken steps to make bonds more attractive, Sitharaman said, referring to the June 5 announcement of easing foreign portfolio investor (FPI) participation in government securities and the tax exemption given to interest income and capital gain from FPIs’ investments in government debt. The government also then gave similar tax relief to the Bank for International Settlements (BIS). 

 

“Certainly, that is not the end of the story. We will be doing more,” the minister said. She added that RBI had also created a framework under which public sector undertakings and banks could raise funds overseas, with the central bank bearing the currency hedging risks. 

The promise of more steps to woo foreign capital comes at a time the commodity shock from the West Asia crisis has proven to be a test of India’s economic resilience and, in the words of chief economic advisor V Anantha Nageswaran, a “live balance of payments (BoP) stress test.” 

Since the war broke out on February 28, fertiliser subsidy requirement has gone up, inflation measured by consumer price index jumped from 3.4 per cent in March to 3.93 per cent in May and the Indian currency depreciated by 3.94 per cent. The rupee closed trading on Monday at a more than one-month high of 94.72 against the dollar amid optimism about an end to the West Asia war. 

The energy shock prompted the Modi administration to cut excise duty on petrol and diesel to ease the burden on fuel retailers and raise import duty on gold. Navigating FY27 will require agility across monetary, fiscal and structural dimensions, finance ministry earlier said in its monthly economic review for May. 

Madan Sabnavis, chief economist at Bank of Baroda, said that since the government and the RBI have already taken steps on the capital account front, there is limited scope for further measures to significantly boost foreign direct investment (FDI), “given the high level of repatriation and the fact that Indian companies are increasingly investing overseas.”

 

“What we can focus on now is monitoring external commercial borrowings (ECB), improving ease of doing business at the state level, and pushing ahead with reforms in bankruptcy resolution,” said Sabnavis. 

Sitharaman said India was facing uncertainty from factors beyond its control, including tariffs, fluctuations in commodity prices and disruptions in global supply chains. She noted that while India’s large domestic market provided a cushion, the country remained dependent on imports of several critical intermediary and raw materials, exposing it to external shocks. 

According to Sitharaman, rising crude oil prices, higher insurance costs and shipping-related risks were among the factors affecting India’s import bill and foreign exchange requirements. 

She also described the monsoon as an annual challenge for policymakers, particularly amid concerns over weather disruptions linked to El Nino conditions. While adequate buffer stocks were available to prevent food shortages, she said farmers’ incomes could come under pressure if rainfall was deficient. 

Highlighting volatility in the fertiliser market, Sitharaman said global supply conditions had changed multiple times since the Union Budget was presented. While concerns had emerged over shortages after some traditional suppliers reduced exports to build domestic inventories, the re-entry of China into the export market after nearly a year had eased some of those fears. 

“So, the supply was that shortage which people thought was offset. So one week you have a challenge, the next week that challenge is addressed, but new challenges come up. So it’s being ready for every such exigency,” she said. 

Sitharaman said India was witnessing rapid growth in investments in data centres and Global Capability Centres (GCCs), with state governments actively competing to attract such projects. 

“We’ve been engaging with the states, not just the Centre, to have a policy on data centres and GCCs,” she said, adding that these investments were expected to generate jobs and support economic activity over the coming decade.

 

The finance minister said the growth of the sector was no longer limited to traditional technology hubs such as Bengaluru, Hyderabad and the National Capital Region, with smaller cities also emerging as destinations for investments.

 

States have not only framed policies but are also proactively engaging with investors to attract GCCs and data centre projects, Sitharaman said.