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Informist, Monday, Nov. 2, 2026

 

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--CONTEXT: Finance Minister Sitharaman speaking at Financial Express event 
--Sitharaman: Realise sensitivity, anxiety among retail investors 
--Sitharaman: Will consider various factors to address investors' anxieties 
--Sitharaman: Need capital; understand need for support to equity investors 
--Sitharaman: Seeing industry invest albeit selectively 
--Sitharaman: Seeing pvt invest as consumption, demand visible post GST cut 
--Sitharaman: To address issues in PLIs for sectors where it didn't succeed 
--Sitharaman on bringing FPI flows: To hear all comments on what can be done 

NEW DELHI – The government will consider all options available to address the "sensitivity" and "anxiety" prevailing among retail investors, particularly equity investors, Finance Minister Nirmala Sitharaman said Monday. She, however, reminded her audience that "taxation is just one part" of drawing domestic as well as foreign investments.

 

The government did not make any tax changes to draw foreign portfolio investments in the financial year 2023-24 (Apr-Mar) when India saw record inflows, Sitharaman said at the Financial Express Leadership Awards 2026 in Mumbai. "I know the circumstances have changed and therefore voices of concern are louder... I quite appreciate it," she said. 

 

"Because at a time when people are putting their very best, that we are able to see sustained over-7% growth, in order to keep that intact we need capital," the finance minister said. Over the past few years, the government has been laying emphasis on deepening the bond market, Sitharaman said, adding that now "we also have this voice which says come on, even equity needs that kind of support".

 

Her comments come amid rising clamour for a cut in long-term capital gains tax as India is facing a challenge in attracting foreign investments. Foreign portfolio investors have pulled out a record INR 3.08 trillion from Indian equities in just nine months of 2026, nearly double the INR 1.66 trillion they had withdrawn in 2025.

 

In India, the government imposes a long-term capital gains tax of 12.5% on listed equity or equity mutual funds above INR 125,000. On top of that, it imposes a cess and surcharge. India also imposes short-term capital gains tax depending on the type of asset, such as 20%, plus cess and surcharge as applicable, on investments in listed equity shares, equity-oriented mutual funds, and business trusts.

 

In June, the government had removed the 12.5% long-term capital gains tax and scrapped the 20% withholding tax on interest earnings for foreign portfolio investors in Indian government bonds to boost capital inflows. Over the past few days, there have been calls for a cut in long-term capital gains tax on equity investments to help with capital inflows that will support the rupee.

 

Economists at the country's largest lender, State Bank of India, have also proposed scrapping the long-term capital gains tax on equity investments to encourage investors to remain invested for longer periods. 

 

India's taxation of savings is also multi-layered. Tax on capital gains is levied on actual profits made. However, securities transaction tax is a tax levied on the transaction value or the premium value irrespective of the actual gain made. Further, securities transaction tax is not a deductible expenditure while calculating capital gains. 

 

This debate on double taxation has, in fact, started the fire of tax changes to boost capital flows. When Sitharaman was asked last month whether taxes must be rationalised, she had said she would "keenly" hear healthy debate on streamlining taxes such as long-term capital gains tax and the securities transaction tax. India currently imposes a 0.15% securities transaction tax on the sale of options and futures. 

 

"Hear all the stakeholders is what government can really do," Sitharaman said on the steps the government will take to boost foreign inflows. "First hear them and then say what can be done," she said. "At this point, I would not like to say more than that." 

 

PRIVATE INVESTMENT

Speaking about private investments, Sitharaman said she is seeing the private sector "come out" and invest. "Maybe they are selective, maybe they are choosing some sectors, maybe they are not doing it in the sector in which they are already present, but I am also seeing that they are coming out," she said.

 

The rise in private investment is primarily due to the impetus that the economy got from the goods and services tax cuts announced in September last year. "Consumption and demand are visible, so industry today has the confidence that I am able to see the demand in the market... I can invest and produce and therefore reach the level that I want to reach," she said. "So that, I think, is triggered post next-gen GST reforms." 

 

On Sept. 3, 2025, the GST Council overhauled the indirect tax regime by collapsing the four-slab structure of 5%, 12%, 18%, and 28% to a two-slab structure of 5% and 18%. It also rationalised the tax rate on a host of items, cutting down taxes on all essential items to either zero or 5%. The council also introduced a new GST rate of 40% on sin and luxury goods.

 

The robust demand in the economy is visible from the buoyant GST collections for October, Sitharaman said. India's GST collections rose at a four-year-high pace of 22.9% in October to INR 2.31 trillion. As per the Budget estimates, the government's GST collections in the financial year 2026-27 (Apr-Mar) are projected to grow by 6.3%. Collectively, in the first seven months of FY27, GST collections grew 13.2% on year to INR 14.78 trillion. "These are reflective of domestic consumption literally holding up the economy," the finance minister said.

 

On incentives to boost private investments, Sitharaman said the government already has production-linked incentive schemes that are supporting industry. While, broadly, PLIs has been a success, she said that in a few sectors they have not worked as well and the government must fix the issues that have hindered their success.

 

India has production-linked incentive schemes for 14 sectors. The scheme was first launched in 2020, initially for three sectors, before being expanded to sectors such as automobiles, automotive components, and mobile manufacturing.  End

 

US$1 = INR 94.90

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Rajeev Pai

 

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