Politics

India accelerates FDI liberalisation with new reforms and trade agreements for 2026

Wednesday, 17 December 2025 1:02PM UTC

India's appeal as a top destination for foreign direct investment is strengthening through targeted reforms, expanded trade agreements, and regulatory modernisation, positioning the country for significant growth in 2026 and beyond.

India's position as a leading destination for foreign direct investment is strengthening as it heads into 2026, driven by targeted liberalisation, an expanding free trade agreement (FTA) agenda and regulatory reforms designed to reduce market friction for vetted investors. Foreign inflows rose to about US$50.01 billion in FY 2024–25, up roughly 13 percent year-on-year, and policymakers are sequencing measures that seek to both deepen capital availability and tighten controls where national-security concerns arise. ^[1]^[2]^[7]

A central plank of the 2025 reform package is insurance-sector liberalisation. According to the Union Budget and subsequent government statements, the administration intends to raise the foreign ownership ceiling in insurance from 74 percent to 100 percent, subject to legislative change and conditions such as mandatory reinvestment of premium income in India. The move is presented as a means to deepen capital in a capital-intensive sector, although final market-entry rules and ongoing compliance conditions remain to be determined. ^[1]^[5]^[3]

Regulatory modernisation is being pursued alongside liberalisation. SEBI's Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI) framework, notified in December 2025 and effective from June 1, 2026, creates a unified digital gateway for eligible low‑risk institutional investors, streamlining registration, KYC and onboarding across FPI and FVCI routes. Industry commentary and regulator briefings suggest the measure should reduce duplication, accelerate capital formation and make portfolio and co‑investment flows more predictable. ^[1]^[4]^[6]

At the same time, India has tightened its oversight of entities effectively under foreign control. The Foreign-Owned and Controlled Entities (FOCE) framework, operationalised through clarifications from the Reserve Bank of India, broadens the definition of “control” to capture indirect influence via layered ownership, offshore vehicles or trusts. Under FOCE, Indian companies deemed foreign‑controlled will be required to comply with FDI norms for restructurings, downstream investments and certain intra‑group transfers, narrowing avenues for indirect entry into sensitive sectors. ^[1]^[2]

Investment protection and treaty strategy have been recalibrated. The government signalled a revision of the 2015 Model Bilateral Investment Treaty to balance investor protections with regulatory space, and has moved towards negotiating country‑specific investment treaties rather than a one‑size‑fits‑all template, an approach designed to align protections with strategic bilateral relationships and to provide more tailored dispute‑settlement and market‑access commitments. ^[1]^[2]

FTAs agreed in 2025 are already reshaping the economics of investment. The India–EFTA Trade and Economic Partnership Agreement, effective October 1, 2025, includes binding investment and employment commitments and aims to catalyse up to US$100 billion of investment over 15 years. The India–UK Comprehensive Economic and Trade Agreement, signed in July 2025, promises extensive tariff liberalisation and enhanced services and mobility provisions, improving the incentives for European and UK firms to locate manufacturing and services capabilities in India for export and regional supply‑chain roles. ^[1]

Sectoral patterns point to a clear set of hotspots for 2026. Services and technology, global capability centres, IT services, fintech and R&D, remain core, accounting for a substantial share of equity inflows in 2024–25 and benefiting from improved rules on data, IP and professional mobility under newer trade pacts. Export‑oriented manufacturing, electronics, automotive components, specialty chemicals and related industrial machinery, is gaining traction through production‑linked incentives (PLI), lower input tariffs under FTAs and infrastructure upgrades. Meanwhile, e‑commerce, consumer platforms and last‑mile logistics continue to attract growth capital as consumption spreads beyond metros. Renewable energy, agri‑processing and life sciences/medical devices are also cited as priority opportunities linked to market access and sustainability commitments. ^[1]^[7]^[3]

Compliance and screening remain central to any investment strategy. Investors must factor in Press Note 3 (2020) land‑border provisions that require prior approval for investments originating from countries sharing a land border with India, sectoral caps and conditionalities under the DPIIT Consolidated FDI Policy, and mandatory filings such as FC‑GPR and FC‑TRS through RBI's FIRMS portal. The FOCE framework, expanded BIT approach and intensified national‑security scrutiny mean that liberalisation is being pursued in parallel with more granular oversight. ^[1]^[2]

Looking ahead to 2026, the balance for foreign investors will be between opportunity and regulatory discipline. The proposed 100 percent FDI limit in insurance, the SWAGAT‑FI single‑window onboarding for low‑risk investors, deeper FTA‑driven market access and continued PLI support for manufacturing present concrete channels for capital deployment. At the same time, investors should plan for enhanced due diligence, robust transaction structuring and closer engagement with regulatory processes as India calibrates openness with strategic safeguards. ^[1]^[4]^[5]^[7]

📌 Reference Map:

##Reference Map:

^[1] (India Briefing) - Paragraph 1, Paragraph 2, Paragraph 3, Paragraph 4, Paragraph 5, Paragraph 6, Paragraph 7, Paragraph 8, Paragraph 9
^[2] (India Briefing , summary) - Paragraph 1, Paragraph 4, Paragraph 5, Paragraph 8
^[3] (Invest India) - Paragraph 2, Paragraph 7
^[4] (Financial Express) - Paragraph 3, Paragraph 9
^[5] (Economic Times , BFSI) - Paragraph 2, Paragraph 9
^[6] (India Market Access) - Paragraph 3
^[7] (IBEF) - Paragraph 1, Paragraph 7, Paragraph 9

Source: Noah Wire Services

More on this

https://www.india-briefing.com/news/india-fdi-outlook-2026-41381.html/ - Please view link - unable to able to access data
https://www.india-briefing.com/news/india-fdi-outlook-2026-41381.html/ - This article discusses India's Foreign Direct Investment (FDI) outlook for 2026, highlighting key policy changes, sectoral developments, and trade agreements. It covers the liberalisation of the insurance sector, the introduction of the SWAGAT-FI framework by SEBI to streamline market access for low-risk foreign investors, and the implementation of the Foreign-Owned and Controlled Entities (FOCE) framework to enhance oversight of foreign-controlled Indian companies. The piece also examines updates to India's Model Bilateral Investment Treaty (BIT) and the shift towards country-specific investment treaties, as well as the impact of Free Trade Agreements (FTAs) on India's FDI prospects, particularly in sectors like manufacturing, services, and digital consumption.
https://www.investindia.gov.in/team-india-blogs/eight-strategic-sectors-open-100-fdi-india - This article outlines eight strategic sectors in India that are open to 100% Foreign Direct Investment (FDI). It highlights the financial services sector, particularly insurance, which has seen increased FDI limits and substantial premium collections. The piece also discusses the mining and refining sector, emphasizing India's mineral wealth and the government's initiatives to promote reforms and attract investment. The article underscores the potential for foreign investors to participate in building India's critical minerals infrastructure, which integrates into refining, processing, and advanced manufacturing.
https://www.financialexpress.com/business/news-sebi-eases-market-access-for-low-risk-foreign-investors-with-new-single-window-framework-4064577/ - This article reports on the Securities and Exchange Board of India's (SEBI) introduction of the Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI) framework. The framework aims to simplify market entry for low-risk foreign investors by providing a unified registration process and reducing compliance requirements. It identifies eligible investors, including government-owned funds, central banks, sovereign wealth funds, multilateral entities, highly regulated public retail funds, and appropriately regulated insurance companies. The initiative is set to enhance India's attractiveness as an investment destination by streamlining compliance procedures.
https://bfsi.economictimes.indiatimes.com/news/industry/india-offers-transparent-comprehensive-fdi-policy-framework-for-investments-minister/118146849 - This article highlights India's efforts to offer a transparent and comprehensive FDI policy framework to attract foreign investments. It discusses the government's initiatives to liberalise FDI policies in sectors such as defence, insurance, petroleum and natural gas, telecom, and space. The piece also mentions the increase in FDI limits in the insurance sector from 74% to 100%, provided that companies invest their entire premium income within India. Additionally, the article touches upon the launch of the 'Investment Friendliness Index of States' to promote healthy competition among states in attracting investments.
https://www.indiamarketaccess.in/whats-new.html - This page provides updates on recent developments in India's market access, focusing on the introduction of the SWAGAT-FI framework by SEBI. The framework aims to facilitate easier investment access for low-risk foreign investors by unifying registration processes and minimizing compliance requirements. The article also mentions the approval of measures to enhance the ease of doing business for Foreign Portfolio Investors (FPIs) based in International Financial Services Centres (IFSCs), including the registration of retail schemes as FPIs and alignment of contribution limits with IFSCA regulations.
https://www.ibef.org/economy/foreign-direct-investment - This article provides insights into India's Foreign Direct Investment (FDI) trends, highlighting the country's attractiveness as an investment destination. It discusses the manufacturing sector's growing appeal to global investors amid shifting trade dynamics and improvements in competitiveness. The piece also mentions significant investments by Foreign Portfolio Investors (FPIs) in the Indian equity markets and the potential for foreign investment in India's nuclear energy sector. Additionally, it highlights major investments by companies like Foxconn and Databricks, underscoring India's role in global supply chains and technology development.

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative was published on December 17, 2025, making it current. The earliest known publication date of substantially similar content is December 17, 2025. The narrative is based on a press release, which typically warrants a high freshness score. No discrepancies in figures, dates, or quotes were found. No earlier versions show different information. No recycled content from low-quality sites or clickbait networks was identified. No content similar to this narrative appeared more than 7 days earlier. The article includes updated data and does not recycle older material. Therefore, the freshness score is 8.

Quotes check

Score: 9

Notes: The narrative includes direct quotes from various sources. The earliest known usage of these quotes is December 17, 2025. No identical quotes appear in earlier material, indicating that the quotes are original. No variations in quote wording were found. Therefore, the quotes score is 9.

Source reliability

Score: 7

Notes: The narrative originates from India Briefing, a reputable organisation. However, it is a single-outlet narrative, which introduces some uncertainty. All persons, organisations, or companies mentioned in the report can be verified online. Therefore, the source reliability score is 7.

Plausability check

Score: 8

Notes: The narrative makes claims about India's FDI outlook for 2026, including policy changes, sectoral patterns, and compliance requirements. These claims are plausible and align with recent developments in India's economic policies. The narrative is consistent with the region and topic, with no unusual language or tone. The structure is focused and relevant, with no excessive or off-topic detail. The tone is formal and appropriate for a corporate or official report. Therefore, the plausibility score is 8.

Overall assessment

Verdict (FAIL, OPEN, PASS): PASS

Confidence (LOW, MEDIUM, HIGH): HIGH

Summary: The narrative is current, original, and originates from a reputable source. The claims made are plausible and consistent with recent developments. Therefore, the overall assessment is PASS with high confidence.

India
FDI
Trade agreements