Union Budget 2026 Sets Stage for Liberalised Foreign Investment Framework

The Union Budget has set the stage for a major reset of India's foreign investment policy. Finance Minister Nirmala Sitharaman announced a full review of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, signalling plans to update how foreign capital enters Indian companies and markets.

This review links closely with Budget 2026 goals, which stress stronger participation in global value chains and support for key sectors. A more agile framework for foreign money is expected to remove capital bottlenecks, help Indian firms raise equity faster and deepen the country's links with international investors.

Budget 2026 and India's foreign investment policy goals

The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, or NDI Rules, currently define how foreign ownership, control and rights work in Indian entities. They also separate foreign direct investment, portfolio flows and other non-debt instruments, giving regulators and investors a common legal structure for managing cross-border equity positions.

Lokesh Shah, Partner at CMS IndusLaw, notes that these NDI Rules are the base of India's foreign investment regime because they provide certainty and predictability on foreign capital flows. Shah believes the decision to reopen them is a clear policy sign that points towards deeper liberalisation over the coming years.

Planned review of NDI Rules and foreign investment policy

Shah explains that the 2019 rules aimed to merge and simplify several earlier regulations. However, investment practices and global markets have moved quickly, leaving some clauses misaligned with present needs. The review is expected to close gaps, clarify grey areas, ease compliance and raise transparency for companies and investors.

Officials are likely to shape the specifics of the overhaul in the months following the Budget 2026 announcement. The direction, though, appears fixed. India wants a more open and growth-led foreign exchange framework that matches its long-term economic ambitions and supports sustained foreign participation in domestic markets.