FM Sitharaman Signals Additional Measures to Boost Foreign Capital Inflows ‘First Step, Not End of the Story’
Finance Minister Nirmala Sitharaman announced that recent measures to attract foreign capital represent the “first step” in India’s strategy to navigate the ongoing geopolitical crisis and the US-Iran conflict. Speaking at the Mindmine Summit 2026, she emphasized the need for India to prepare for uncertainties in the global environment, particularly as the economy faces pressure from its reliance on imports of critical raw materials, crude oil, and fertilizers.
Sitharaman highlighted the initiatives taken by the Reserve Bank of India (RBI) and the government to enhance overseas investment. She noted that these efforts are just the beginning, with further measures likely to follow. Assessments by the RBI and the government suggest that the domestic bond market could effectively attract foreign investment.
Measures to Attract Foreign Capital
To facilitate foreign investment, the government expanded the list of securities eligible under the Fully Accessible Route (FAR) on June 5. This change allows newly issued government securities to be included, simplifying investment procedures and reducing compliance requirements for foreign investors in the government bond market. Additionally, foreign portfolio investors now enjoy income tax exemptions on interest earnings and capital gains from investments in government securities.
Sitharaman reiterated that while the current focus is on the bond market, the government is considering further steps to attract a larger pool of foreign investment. On the same day, the RBI permitted banks to utilize its swap facility for Foreign Currency Non-Resident (Bank) deposits with maturities of three to five years until September 30. This facility enables banks to exchange their US dollar deposits with the RBI, aiding in the management of foreign exchange exposure.
Strain on External Sector
India’s foreign exchange reserves fell by $711 million to $681.61 billion during the week ending June 5. Rising global fertilizer prices have become a pressing issue, with the fertilizer ministry seeking to double subsidy support for the current financial year. The Union Budget has allocated Rs 1.71 lakh crore for fertilizer subsidies.
The disruption of shipping through the Strait of Hormuz, amid rising tensions in West Asia, is expected to increase India’s fertilizer import costs. Importers are facing challenges in securing adequate supplies and managing the rapid pace of fertilizer price increases. Additionally, concerns over India’s crude oil import bill have intensified, as the country imports approximately 87% of its crude oil requirements, with nearly half of those shipments passing through or near the Strait of Hormuz.
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