Surjit Bhalla Urges India To Ease FDI Rules As Inflows Decline And Outflows Surge

India’s economy remains one of the fastest-growing globally, but foreign investment inflows have slowed sharply. Bhalla has called for urgent reforms, arguing that restrictive rules, regulatory uncertainty, and abrupt policy interventions are discouraging investors at a time when India needs capital to sustain growth.

Bhalla’s Recommendations

Bhalla suggested revisiting India’s bilateral investment treaty framework, which currently requires foreign firms to exhaust remedies in Indian courts before approaching international arbitration. He argued this delays dispute resolution and undermines investor confidence. He also recommended tax incentives, state-level deregulation, and predictable policies to attract long-term capital.

Declining FDI Trends

Government data shows India’s FDI equity inflows dropped from $59.6 billion in FY21 to $47.8 billion in April–December FY26. Net FDI outflows rose to $27 billion in FY26, raising concerns about external finances. Rising crude oil prices have further pressured the rupee, which was Asia’s worst-performing currency in 2025 and continued weak into 2026.

Investor Concerns

Bhalla noted that sudden export bans and quality-control restrictions have eroded trust. He stressed that investors respond to profitability and stability, and India must ensure both to remain competitive globally.

Strategic Importance

With political stability and a strong growth outlook, Bhalla believes India has a rare window to push reforms. Easing FDI rules now could strengthen external finances, boost job creation, and reinforce India’s position as a global investment hub.

Investment Climate Highlights

•⁠  ⁠FDI equity inflows fell from $59.6 billion in FY21 to $47.8 billion in Apr–Dec FY26

•⁠  ⁠Net FDI outflows surged to $27 billion in FY26

•⁠  ⁠Rupee was Asia’s worst-performing currency in 2025, continued weak in 2026

•⁠  ⁠Bilateral investment treaty rules seen as restrictive, delaying dispute resolution

•⁠  ⁠Bhalla calls for tax incentives, deregulation, and predictable policies to revive inflows

Sources: Bloomberg, Moneycontrol, The Economic Times