India Opens a Wider Gateway for Global Capital Through G-Sec and Equity Market Reforms

India has announced a significant set of financial-market reforms aimed at making the country’s equity and government securities markets more attractive to foreign investors. The measures, announced by the Ministry of Finance on 5 June 2026, are designed to simplify access, broaden the investor base and bring more long-term global capital into India’s capital markets.

The reform package focuses on two major areas: easier equity investment for individual Persons Resident Outside India, and deeper foreign participation in India’s government securities market. Together, these steps signal India’s intent to position itself as a more open, efficient and globally competitive investment destination.

A key change concerns individual Persons Resident Outside India, or PROIs. Under the new framework, such individuals will be allowed to invest in listed Indian companies through the Portfolio Investment Scheme. Earlier, this route was available mainly to NRIs and OCIs. The individual investment limit for a PROI in any listed company will rise from 5 percent to 10 percent, while the overall investment limit for all individual PROIs in a company will increase from 10 percent to 24 percent.

This is an important widening of India’s equity investment architecture. It creates a larger door for overseas individuals who want regulated exposure to Indian listed companies. By using existing onboarding systems already built for NRI and OCI investors, the reform can make participation smoother and reduce procedural friction. For Indian markets, it can bring a broader pool of foreign investors and support steadier capital flows into equities.

The second major reform is linked to government securities, commonly known as G-Secs. India wants to make its sovereign debt market deeper, more liquid and more attractive to global institutional investors. The government has decided to expand the Fully Accessible Route to include new government securities with tenors of 15 years, 30 years and 40 years, along with Sovereign Green Bonds in FAR-eligible tenors.

This matters because long-tenor bonds are especially relevant for pension funds, insurance companies and sovereign wealth funds. Such investors usually seek stable, long-duration assets. By opening more long-term securities to foreign investors, India can strengthen demand at the longer end of the yield curve. A deeper yield curve helps pricing, borrowing, market stability and long-term financial planning.

The government has also decided to simplify the general route for FPI investment in government securities. Three restrictions — the short-term investment limit, concentration limit and security-wise limit — are being removed. However, the overall quantitative ceiling will remain: 6 percent of the outstanding stock of Central Government securities and 2 percent of State Government securities.

Another simplification is the merger of “general” and “long-term” sub-categories into a single limit for investments in Central Government securities and State Government securities. This makes the framework easier to understand and easier to operate. Global investors value clarity, and simpler rules often matter as much as higher limits.

The most striking part of the announcement is the tax reform for FPI investment in government securities. The government has decided to exempt FPIs from income tax on interest and capital gains earned from investments in G-Secs. This exemption will apply from 1 April 2026 to interest or capital gains arising on or after that date. A similar exemption is being provided to the Bank for International Settlements for its investments in Indian government securities.

This tax measure can improve India’s competitiveness in the global bond market. Large international investors compare countries not only by yield, but also by taxation, settlement ease, currency risk, liquidity and regulatory simplicity. By making tax treatment more attractive, India is trying to draw durable capital from pension funds, insurance funds, sovereign wealth funds and other long-term pools of money.

The larger economic logic is clear. India needs deep capital markets to support infrastructure growth, fiscal financing, green investment and private-sector expansion. A wider investor base reduces dependence on a narrow set of participants and can improve liquidity across the financial system. When government securities become more accessible to global investors, they can also help strengthen India’s presence in international bond portfolios.

For equity markets, the PROI reform adds another layer of participation from overseas individuals who see India as a long-term growth story. For the bond market, the G-Sec reforms can attract patient institutional capital. For the wider economy, both moves support the same objective: making India’s financial markets broader, deeper and more globally integrated.

The reforms also fit into India’s larger ambition of becoming a preferred destination for global investment. Strong growth prospects, a large domestic market, digital financial infrastructure and expanding capital-market depth already make India attractive. These new measures reduce operational barriers and offer foreign investors a more seamless route into Indian assets.

The announcement therefore represents more than a technical change in financial rules. It is a strategic move to connect India’s growth story with global pools of capital. By opening wider routes into equities, expanding access to long-term G-Secs, simplifying FPI rules and improving tax treatment, India is building a stronger bridge between domestic development needs and international investment appetite.