There are indications the government will have a re-think on the recent Union Budget proposal to levy a surcharge on super-rich individuals that also brought into its fold foreign entities registered as non-corporate.
The move has spooked India's stock market and prompted the foreign portfolio investors to pull out over Rs 12,000 crore since the Budget on July 5, marking it the biggest fall in foreign investment year-to-date in 2019. In addition to that, the stocks listed on the Bombay Stock Exchange have lost Rs 15 lakh crore since the Budget.
In this backdrop, the officials of Prime Minister's Office, finance ministry, Niti Aayog, Prime Minister's Economic Advisory Council and Security and Exchange Board have held a high-level meeting and are expected to address the sell-off in the market.
Sources said that that a complete reversal of the policy may not be in the offing but there could be some tweaks to assuage the frayed nerves of foreign investors as a sell-off could further impact India's already slowing economic growth.
The market is looking at a cyclical downturn with the realty, auto and NBFC space showing no signs of a turnaround, according to experts.
Currently, the surcharge of 15% is levied on the income of individuals earning upto Rs 1 crore, and 10% on incomes of individuals earning between Rs 50 lakh and Rs 1 crore. In the Union Budget for 2019-20, the surcharge on income tax for individuals earning between Rs 2 crore and Rs 5 crore has been increased to 25% and the persons earning above Rs 5 crore has been increased to 37%.
Finance Minister Nirmala Sitharaman has already rejected any rollback of such a surcharge imposed by the Budget. The tax proposal, which has been incorporated in the finance bill for 2019, has already been passed by parliament.
However, the government is thinking some tweaks that can reassure the markets and investors about their re-entry into the Indian stock market.
Along with that, the government is also expected to address the issues in the automobile sector, which has not only seen a dip in sales and exports but also staring at a massive 10 lakh job losses.