India’s landmark Budget 2026 has introduced transformative financial reforms specifically designed to mobilize capital from the global Indian diaspora. Finance Minister Nirmala Sitharaman has implemented strategic measures to position overseas Indians as crucial contributors to India’s capital markets amid cautious foreign institutional investment trends.
The centerpiece reform doubles individual investment limits for Persons Resident Outside India (PROI) in listed Indian companies from 5% to 10%, while simultaneously raising the aggregate foreign holding cap from 10% to 24%. This structural change enables non-resident Indians to acquire more substantial equity positions without encountering regulatory barriers, providing both retail and high-net-worth investors with expanded portfolio opportunities and meaningful ownership in blue-chip enterprises.
Concurrently, the government has strengthened the Portfolio Investment Scheme (PIS) framework, facilitating direct stock market access through Reserve Bank of India-approved designated bank accounts. This enhancement arrives at a critical juncture, as foreign investors withdrew approximately Rs 19 billion from Indian equities in 2025 followed by an additional Rs 4 billion in January 2026. The revitalized PIS mechanism aims to counterbalance volatile institutional flows with more stable, long-term diaspora capital.
Regulatory modernization forms another cornerstone of these reforms, with promised simplifications to Foreign Exchange Management Act (FEMA) rules governing Non-Debt Instruments and Overseas Investments. This shift from control-oriented approaches to facilitation-focused frameworks promises accelerated approvals, reduced compliance burdens, and streamlined fund repatriation processes—particularly beneficial for investments in startups, unlisted companies, and alternative assets.
The budget further amplifies Gujarat International Finance Tec-City (GIFT City) as a global financial hub, offering tax incentives, international-standard regulations, and simplified cross-border transaction mechanisms. This development provides NRIs with enhanced access to international financial products while maintaining connectivity to Indian markets through globally competitive platforms.
Financial experts anticipate these reforms will fundamentally reshape foreign participation patterns in Indian equities. By expanding direct access for overseas individuals, India diversifies its investor base beyond large institutions while potentially stabilizing markets through longer investment horizons characteristic of diaspora investors. Sectors including banking, financial services, capital goods, and technology are expected to benefit most significantly from the expanded NRI participation.
These targeted measures form part of broader budgetary initiatives aimed at boosting infrastructure spending, strengthening manufacturing incentives, and supporting digital finance ecosystems—all designed to sustain growth momentum and improve corporate earnings visibility that fundamentally drives equity returns.