Sudip Bandyopadhyay, a noted market expert, has emphasized the importance of policy stability and tax relief to attract foreign portfolio investors (FPIs) back to Indian markets. Despite robust domestic retail participation, Bandyopadhyay warns that foreign investment remains crucial for comprehensive economic growth.
Bandyopadhyay highlights that India's current tax framework, particularly the long-term and short-term capital gains taxes, poses a structural disadvantage for global investors. He notes that most international markets do not impose such taxes at the same scale, making India less competitive.
The Securities Transaction Tax (STT), initially introduced as a substitute for the long-term capital gains tax, now exists alongside it, which Bandyopadhyay describes as unfair. He suggests that investors might accept STT if the long-term capital gains tax were removed.
“We need FPIs to be in the market and invest in India because we need well-rounded economic growth and a strong capital market.”
Sudip Bandyopadhyay
Frequent policy changes are another concern for foreign investors, according to Bandyopadhyay. He argues that sudden changes in taxation through annual budgets create uncertainty and undermine confidence in policy stability.
Bandyopadhyay also questions the revenue impact of these taxes, noting that many investors are currently sitting on losses due to lacklustre market performance. He describes STT collections as minuscule in the government's budget.
Background
The discussion comes at a crucial time for Indian markets, where policymakers are trying to balance revenue generation with the need to attract stable foreign investment flows. Stability and consistency in policy are seen as essential for attracting long-term foreign capital.
As policymakers deliberate on potential changes, the focus will be on maintaining a stable and predictable policy environment to enhance investor confidence and attract foreign investments.
