Nirmala Sitharaman Unfettering Markets: More Policy Steps Planned to Spur Foreign Capital Inflows

Nirmala Sitharaman Unfettering Markets: More Policy Steps Planned to Spur Foreign Capital Inflows​

Finance Minister Nirmala Sitharaman has signaled that the government intends to introduce further measures aimed at attracting foreign capital into the Indian market. Speaking at the Hero Mindmine Summit 2026, she emphasized that increased investment is crucial for the nation's growth trajectory. The Ministry of Finance confirmed that a calibrated approach is being adopted to ensure markets see the required levels of investment.

Immediate Steps Taken to Boost Foreign Investment​

The initial measures implemented by the government are designed to encourage foreign capital inflows. These steps include making tax exemptions regarding withholding tax on interest and capital gains tax for foreign investors in G-secs (Government Securities).

Sitharaman confirmed that these actions are merely the beginning of a sequence of initiatives. She stated clearly, "Certainly, that's not the end of story, there will be more." This signals a continuous commitment from the government to support market depth and stability.

RBI Facilitates Forex Hedging for Financial Institutions​

To bolster confidence and risk management within the financial sector, several specific measures involving the Reserve Bank of India (RBI) have been introduced. The RBI granted banks access to its swap facility for Foreign Currency Non-Resident (Bank) (FCNR(B)) deposits until September 30.

This new facility allows participating banks to manage currency risks effectively by swapping US dollar deposits with the RBI. This move enhances the operational capacity of banks, enabling them to raise their own funds unfettered, as noted by Sitharaman.

Concessional Facilities for Public Sector Undertakings​

Further supporting foreign capital inflows, a concessional forex swap facility has been established. This initiative is specifically designed to encourage Public Sector Undertakings (PSUs) to undertake External Commercial Borrowings (ECBs).

This specific support mechanism remains active until September 30, providing critical financial stability tools for PSUs while they access international financing markets. The entire structure announced by the RBI ensures that currency hedging will be managed at the expense of the central bank itself.

Economic Strain from Key Import Commodities​

Amid these policy announcements, Sitharaman acknowledged significant economic pressures facing India. She stated that the Indian economy is currently grappling with "severe strain" due to reliance on imports for several crucial inputs.

Specifically, the strain relates to importing key raw materials, as well as crude oil and fertilizers. Minister Sitharaman highlighted that the global situation is in constant flux, with new challenges emerging weekly. The country must remain prepared for every such exigency.