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India's finance ministry will propose regulatory and tax-code changes to help the next government spur foreign currency inflows and corporate fundraising when it takes power after elections end next month, said people familiar with the matter.
If approved by the next administration, private-equity funds would gain access to so-called safe-harbour tax rules, stock and bond investors would stand to earn higher post-tax returns, while companies and municipalities would find it easier to raise cash, according to two finance ministry officials with knowledge of the matter. They asked not to be named as the proposals haven't been publicly released.
Indian equities have rallied and the rupee has strengthened this year on optimism a victory by the opposition Bharatiya Janata Party in the general election now underway will boost investment and spur growth from near a decade low.
Shubhada Rao, chief economist at YES Bank, said, "India needs to quickly restore that message through imbibing confidence among global investors with a forward-looking policy and a greater degree of stability."
Among the proposals is a plan to remove capital gains tax for short-term stock investments while marginally raising the securities transaction tax, the officials said. Other steps would include applying a uniform withholding tax for foreign borrowings, easier rules for initial public offerings and the debut of municipal bonds. The government also would be asked to consider an amnesty program to lure back funds parked outside the country without paying Indian taxes, they said.
