India Plans Further Measures to Attract Foreign Capital Amid West Asia War

Finance minister Nirmala Sitharaman said India would take more steps, over and above those taken by the Centre and the banking regulator, to bolster capital inflows if the situation so warranted.

These were “first step toward drawing some capital back, although we've at the moment confined it only to the bond market,” Sitharaman said on Monday, referring to tax relief measures, bespoke backstops for public sector external commercial borrowings and dedicated FCNR -currency non-resident deposits.

“But, certainly, that's not the end of the story. We'll be doing more. We recognise we need more foreign capital to come in,” she said at the Mindmine Summit 2026 in the national capital, pointing at the “calibrated approach” adopted by authorities to improve foreign investments in Indian markets amid the West Asia war.

India, on June 5, announced a series of measures to reverse capital outflows and prop up the rupee. The government brought in an ordinance to exempt foreign portfolio investors from capital gains and withholding taxes and expanded the pool of investable government securities for them. It has also permitted persons resident outside India to invest through the portfolio investment scheme.

Separately, the Reserve Bank of India extended a concessional forex swap facility up to end-September to state-run companies to encourage external commercial borrowings by them. It also decided to bear full hedging costs until September 30 for authorised dealer banks raising fresh 3-5 year Foreign Currency Non-Resident (Bank) deposits, among other steps.

As a result of the RBI measures, banks can now “go unfettered to raise capital from outside,” the minister said. “So, we have taken a very calibrated approach to make sure that the markets do receive the required investments.”

India’s rupee has since strengthened, while yields on the benchmark sovereign bonds have reached their lowest level in the past two months.

Sitharaman said India’s large domestic market, with rising consumption, is a matter of comfort amid the West Asia war but reliance on imports of key raw materials and intermediate goods remains a vulnerability.

Elevated global crude and fertiliser prices, uncertainties around the US tariffs and forecasts of a below-par monsoon season pose risks, she added. While adequate buffer stocks maintained by the government since last year should prevent food shortages, farmers’ incomes could be hit if rains fail, she said.

Moreover, shipping and insurance costs have jumped, thanks to the West Asia conflict and the targeting of the Strait of Hormuz through which a fifth of global energy supplies pass.

“Exchange reserves will have to be adequately kept” as a growing economy needs these critical inputs, she said.

Earlier this month, senior government officials had said the fertiliser ministry had sought doubling of the FY27 fertiliser subsidy bill from the budgeted ₹1.71 lakh crore due to a spurt in prices overseas.

Moreover, the government saw a potential revenue forgone of ₹1.23 lakh crore—including through cuts in excise duties on petrol and diesel—to enable oil marketing companies to retain pump prices in the initial 78 days of the West Asia crisis, they had said.