MUMBAI: India needs more equity capital to sustain economic growth of over 7 per cent, Union Finance and Corporate Affairs Minister Nirmala Sitharaman said on Monday, acknowledging concerns about sustained foreign portfolio investor (FPI) outflows in “changed” circumstances among market participants.
“Taxation is just one part of it. I quite appreciate and realise the sensitivity and anxiety prevailing among retail investors and equity market participants,” the minister said at a Financial Express event here. A few weeks earlier, Sitharaman had said she would keenly listen to discussions on long-term capital gains (LTCG) tax and the securities transaction tax (STT) on equities.
The minister stressed that the tax structure was the same in 2023-24 (FY24), when India attracted strong capital inflows. “Nothing was done differently for drawing investments. But, of course, the situation is very different now. Circumstances have changed, challenges have grown and more net FPI outflows have happened,” she said, but added that foreign investors had begun returning.
In FY27, FPIs had withdrawn a net ~1,59,568 crore from Indian equities as of the end of October. They had, however, turned net buyers over the past two weeks.
While the Centre had spent the past few years deepening the corporate bond market, she said there were now calls for similar support for equity markets. “At a time when our growth is very important, and people are putting their very best to ensure that we sustain growth of over 7 per cent, we need capital and equity particularly now,” she said.
Stressing that India’s growth momentum must not be allowed to weaken amid global uncertainties, the Finance Minister — earlier in the day at HSBC’s Algorithm of Inclusion event — urged greater confidence in India’s economic prospects, arguing that the country’s fundamental indicators remained sound despite global uncertainty.
The minister also called for a shift in the way India’s economic performance was discussed, arguing that excessive scepticism, even among informed commentators, risked undermining confidence. “India needs a lot of optimism, India needs a lot of conversing with optimism, India needs a reduction in cynicism. India needs to voice that we believe in ourselves,” she said.
Citing robust GST collections and the resilience of the banking system, she said the country’s key economic indicators did not suggest any underlying fragility. “Instrumental pillars of fundamental economic well-being are all doing alright; there is no fragility,” she said.
Sitharaman attributed the economy’s resilience in part to domestic demand, rising purchasing power and policy stability. The expansion of the middle class and its growing purchasing power had strengthened consumption, providing an important cushion against external uncertainties.
“We have a large domestic market. Earlier, the market did not have that much purchasing power. Today, we are seeing the Indian middle class grow, along with its purchasing power. This is making a difference to domestic consumption,” she said.
Sitharaman, speaking later at the media event, pointed to signs of a recovery in private investment, although companies remained selective about sectors and capacity expansion. She attributed the improvement partly to the demand revival following the next-generation goods and services tax (GST) reforms implemented in September 2025.
The reforms had made consumption and demand more visible, giving businesses greater confidence to invest in capacity and production, she said.
She said record GST collections in October underscored the resilience of domestic consumption, which was providing businesses with greater visibility on demand and supporting investment decisions.
The government, she in the earlier said, will maintain its capital expenditure drive until private investment gathers sufficient momentum to expand productive capacity. “Capital expenditure is a very important component of our growth strategy because till such time the private sector also comes in to expand capacity, it is important for the government to push through with capital expenditure,” she said.
The Centre’s capital expenditure push over the past five years had delivered results, with its multiplier effect supporting wider economic activity.
However, she cautioned that higher public spending must not come at the expense of fiscal discipline. “I agree we need to spend, but it has to be with responsibility,” she said, adding that fiscal prudence would remain a priority under Prime Minister Narendra Modi.
At the earlier event, Sitharaman said expanding insurance coverage would remain a central priority in the government’s financial inclusion agenda, particularly for the poorest and most vulnerable sections of society. “Insurance for all is very clearly on the top agenda,” she said.
The government is seeking to widen access to insurance and pension products, including through schemes such as the Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana, which offer insurance cover at minimal premiums. Subsidised pension programmes are also intended to provide financial security to those unable to work. Expanding access to formal credit, particularly for aspiring entrepreneurs and small businesses, is another priority.
The Centre’s agenda is aligned with the Insurance Regulatory and Development Authority of India’s vision of ‘Insurance for All by 2047’, which aims to extend life, health and property insurance coverage across the country.
The government also plans to establish artificial intelligence (AI)-training-capable centres in every district to address the mismatch between industry requirements and the skills of young people entering the workforce. “There is a gap between employers’ expectations and the capabilities of young people entering the workforce. Students graduating from colleges in smaller towns and rural areas may not always meet industry requirements. We want to bridge that gap,” Sitharaman said.
The Centre would also support states in upgrading Industrial Training Institutes (ITIs), many of which have struggled to keep pace with changing industrial requirements. She cited partnerships between Assam and Odisha and Singapore for industry-oriented training and certification as examples of efforts to improve vocational skills.
On banking reforms, Sitharaman said a high-level committee would assess the sector’s future requirements and recommend measures to strengthen the banking system. The Finance Ministry has appointed former Central Vigilance Commissioner S N Patel to head the committee. Its members include RBI Deputy Governor Shirish Chandra Murmu, former Indian Bank chief Padmaja Chunduru and former RBI Deputy Governor N S Vishwanathan. The panel has six months, until April 2027, to submit its recommendations.
Sitharaman also highlighted the role of welfare interventions in reducing poverty, citing improvements in access to healthcare, food security, housing and basic amenities. Referring to World Bank estimates, she said the poverty rate had declined from around 25 per cent to a little over 2 per cent by the end of financial year 2023.
Union Finance and Corporate Affairs Minister Nirmala Sitharaman on Monday said the ongoing differences between Tata Sons and Tata Trusts should be resolved quickly. “This is a very critical component of the economy, and has to be amicably settled among themselves, to make sure that it comes back quickly to some normalcy… It cannot be spilling out in the public. And for the maturity of that leadership, we would like to have this seen settled sooner,” she said.
Source: Business Standard
