India exempts Saudi Arabia's wealth fund from investment cap rules to boost capital inflows

India has agreed to exempt Saudi Arabia’s Public Investment Fund (PIF) from certain foreign portfolio investment (FPI) rules in a move aimed at attracting long-term capital and deepening financial engagement with the Gulf nation, two sources familiar with the matter said.

The exemption comes amid ongoing efforts by both countries to strengthen economic ties, following Prime Minister Narendra Modi’s visit to Saudi Arabia in April. During the visit, both sides committed to promoting investment in sectors such as energy, infrastructure, and pharmaceuticals.

The rules in question limit foreign ownership by clubbing investments from various sovereign entities under a single 10% cap in a listed Indian company. This had constrained the PIF and its subsidiaries from making independent investments in India.

“The requirement to club investment from different sovereign entities together limits the ability of the Saudi fund and its subsidiaries to invest independently,” said one of the sources, who declined to be named, reported Reuters.

The exemption granted to the Saudi fund will allow its different arms to invest separately, giving them greater flexibility in deploying capital in Indian equity markets without breaching regulatory thresholds, the source added.

The PIF, which manages assets worth approximately $925 billion globally, currently has a limited exposure to Indian markets. According to its website, its India investments include $1.5 billion in Jio Platforms and $1.3 billion in Reliance Retail.

India, the world’s third-largest oil importer, is seeking long-term capital from energy-rich Gulf nations, while Saudi Arabia is looking to broaden its global footprint through investments in high-growth markets as part of its Vision 2030 economic diversification strategy.

To accelerate these goals, a high-level task force was set up in 2024 to fast-track Saudi Arabia’s plans to invest $100 billion in India.

“The progress made by this Task Force in areas such as taxation was also a major breakthrough for greater cooperation in the future,” a joint statement issued in April said.

“The two sides affirmed their desire to complete negotiations on the BIT at the earliest.”

Recent reports also indicated that the Indian government is exploring additional tax relief measures for the PIF to encourage greater investment in infrastructure and energy sectors.