Union Finance Minister Nirmala Sitharaman on Monday said the government was open to considering feedback on India's taxation regime amid growing concerns among foreign portfolio investors (FPIs) and domestic equity market participants.
Emphasising the need to sustain economic growth, Sitharaman said India had attracted record-high investments a couple of years ago under the same tax structure, but acknowledged that circumstances had since changed, with foreign investors pulling out funds and concerns over the tax regime growing louder.
“The tax structure today is what it was even in 2023 when inflows were record high. Circumstances have changed. FPI outflows have happened, voices of concern are louder. We have a voice saying equity needs the kind of support that debt has. I recognise that voice. First, I will hear them (FPIs) and then see what we can do,” she said at an event.
While the government's focus in recent years has been on deepening and widening the bond market, Sitharaman acknowledged the need for similar policy support for equity markets.
“I will consider all this because at a time when our growth is very important, and people are putting their very best into ensuring sustained growth of 7% plus, we need capital and equity particularly. Although the last few years have seen a lot of emphasis on the bond market, deepening it and widening it, we now also have this voice which says equity needs that kind of support,” she said.
Her remarks come amid concerns over sustained foreign investor withdrawals and the attractiveness of Indian equity markets, with market participants flagging taxation as one of the factors influencing investment decisions.
Meanwhile, media reports said the Securities and Exchange Board of India (Sebi) has recommended that the government remove the long-term capital gains (LTCG) tax on foreign investors. The market regulator has also proposed tax relief for domestic mutual fund investors, suggesting an exemption from LTCG tax when they sell existing holdings to invest in new funds, according to the reports.
Sitharaman also highlighted the government's broader approach to economic reforms, saying recent changes in the goods and services tax (GST), income tax and other policy areas were aimed at building trust among people, businesses, farmers and taxpayers.
At another event on Monday, the Finance Minister said public capital expenditure would remain a key driver of economic growth until private sector investment gathers momentum.
“Capex is a very important component of our growth strategy because till such a time the private sector is going to expand capacities or establish newer capacities, it's important for the government to push through with the capital expenditure,” she said.