Economic & Investment Context:
India recorded FDI inflows of ~USD 81 billion in FY25, while GDP growth is estimated at ~7.4 % in FY26. Capital expenditure is budgeted at ₹12.2 lakh crore (~3.1 % of GDP) under Budget 2026, with a fiscal deficit target of ~4.3 % of GDP.
Key Developments Relevant to Foreign Investors
| Policy Area | Key Provision | Why It Matters for Foreign Investors & Counsel |
| Capital Markets & FDI | Portfolio Investment Scheme reforms expand participation thresholds for certain non- resident investors in listed Indian securities. | Broadens structured access for offshore funds and cross- border portfolio investment. |
| Foreign Exchange Framework | Comprehensive review of FX rules underway to simplify entry routes and reporting. | Signals gradual movement toward more investor-friendly cross-border capital flow rules. |
| Digital Infrastructure | Long-term tax incentives for foreign companies using Indian data centres for global cloud and digital services. | Positions India as a base for global digital infrastructure and technology operations. |
| IFSC (GIFT City) | Continued concessional regime, including extended tax holidays and reduced corporate tax for qualifying units. | Strengthens India’s role in cross-border fund structuring, leasing and global treasury platforms. |
| Direct Tax Reform | New Income Tax Act effective April 1, 2026 with simplified drafting and digitised compliance. | Improves predictability and reduces litigation risk for foreign businesses and service models. |
| Transfer Pricing | Expanded safe harbour clarity for IT and technology-enabled services, alongside APA mechanisms. | Reduces recurring disputes and supports multinational service structuring. |
| MSMEs & Supply Chains | Enhanced credit access and formalisation measures for MSMEs. | Strengthens supplier ecosystems supporting global manufacturing and sourcing strategies. |
|
Infrastructure & Capex |
Sustained public capex in transport, logistics and industrial corridors. | Signals a strong pipeline for infrastructure, projects and related cross-border mandates. |
| Advanced Manufacturing | Continued policy support for semiconductors, electronics and strategic sectors. | Aligns with global supply chain diversification and “China+1” strategies. |
| Regulatory & Compliance Trends | Greater digitisation and system- driven compliance across tax and filings. | Reduces procedural friction while increasing the importance of upfront structuring and documentation. |
| Macro & Fiscal Direction | Ongoing fiscal discipline alongside growth-oriented expenditure. | Supports long-term macro stability and investor confidence. |
Notes for International Investors
- Reforms emphasise simplification, not deregulation
- Tax certainty is improving, but structuring discipline remains essential
- Digital infrastructure and manufacturing reflect long-term policy commitment
- Strong contracts and dispute planning are increasingly important in large projects
- Early coordination with Indian counsel helps manage regulatory and execution risk
Notes for International Law Firms
- India-related mandates are becoming more integrated and multi-jurisdictional rather than standalone local matters
- Early coordination with Indian counsel improves structuring efficiency and regulatory alignment
- Cross-border transactions increasingly require parallel advice on tax, foreign exchange and sectoral regulations
- India is emerging as a repeat jurisdiction for funds, technology, manufacturing and infrastructure mandates
For further information or a more detailed discussion, please visit our website or contact Uday
Singh Ahlawat, Managing Partner, Ahlawat & Associates, India.
