India’s government said on Friday it would scrap a controversial provision that taxed foreign investors, backtracking only a month after the measure was introduced.
Finance Minister Nirmala Sitharaman said the government would revoke the surcharge, which increased tax on foreign trusts investing in India to over 40 per cent.
The measure had been introduced as part of Prime Minister Narendra Modi’s July budget, but sparked considerable criticism of his newly re-elected government. It also prompted some investors to leave their positions, with net outflows from foreign portfolio investors of $5.5bn in July.
India’s stock market went on to suffer its worst July in 17 years, amid broader pressure as the government struggles to respond to a deepening economic slowdown.
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