Stop sudden tax demands: Raghuram Rajan on fixing India's business environment
Businesses hoping to ride the global supply chain wave are hitting an unexpected brick wall in India: surprise tax demands.'Stop having tax demands on business people which come out of the blue which vitiate all their operations for many years. I mean, have some control,' Rajan said in an interview with India Today TV.This unpredictable tax harassment is not just annoying, but a deal-breaker for the manufacturers and service providers India needs to attract if it wants to become the world's go-to alternative to China amid the post-pandemic reshuffle and US-China trade tensions.advertisement'I mean, this is something that even within the government you hear, sort of worries about this kind of tax demand coming, but the government needs to control its tax authorities,' Rajan said.LEVEL PLAYING FIELD
But it's not just tax demands. Rajan stresses the need for a level playing field where policies don't suddenly shift to favour national champions at the cost of foreign investors.'Nobody wants privileges but they want some certainty about policies,' he said, adding that easing rules for domestic firms and solving long-standing issues like land acquisition are vital too.'Of course, we also do need to do homework for domestic firms. Easier rules and regulations, more transparent as well as focus on things like land acquisition and so on which have often been a bugbear. But that said, we've made enormous improvements in infrastructure which I think will be helpful, uh, for whatever sets up in India,' he added.The government must listen to businesses on the ground and act fast. Rajan pushes for ramping up reforms already underway, using technology to make compliance easier and to crack down on rogue bureaucrats. 'We need to do that effectively if we are going to make a difference,' he says.advertisementIndia has the chance to become a global supply chain hub. But first, it must fix these fundamental business hurdles, especially the tax surprises that keep knocking down comRaghuram Rajan warns India's global supply chain dreams could crash before takeoff—unless it reins in rogue tax demands, ends policy flip-flops, and actually makes it easier to do businesspanies before they can even get started
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Edited Excerpts –It is always a pleasure interacting with you!Volatility is an intrinsic part of the capital markets, and it is particularly evident during events like geopolitical flare-ups or tariff uncertainties. For a broking house, it's never about predicting the next headline. It's about staying prepared, always!In periods of high tension, like the recent India-Pakistan developments, we rely on data-driven insights—especially stock beta analysis—to gauge market sensitivity and adjust exposure helps to stay aligned with long-term goals while managing real-time risk. There is no one-size-fits-all formula for retail participants. Markets reward resilience, not should you chase the momentum—but build on mechanisms. 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With inflation easing to 3.16% in April '25 and the RBI lowering the repo rate to 6%, there is room for further policy yields soften, we expect strong interest in medium- to long-duration bonds, and see this as a good window for clients to lock in attractive consolidation, India's inclusion in global bond indices, and a stable macro environment are further strengthening the some relief from recent market consolidation, valuation concerns persist in certain small and mid-cap segments, as many stocks remain disconnected from their earnings growth this environment, the best approach is to be highly selective and focus on quality, fundamentally strong companies with robust financials and sustainable business chasing momentum or liquidity-driven rallies, as overvalued names remain vulnerable to corrections, especially if triggered by global or domestic stocks have rallied nearly 45% since April 7, 2025, driven by the success of indigenous defence equipment during the India-Pakistan tensions and robust government support for promoting domestic defence the sharp rally has led to stretched valuations, the sector remains a compelling long-term investment geopolitical uncertainties and security challenges are expected to push India's defence budget—currently at 1.9% of GDP—higher in the coming years, providing further momentum to the said, investors should stay selective and stick to companies with strong fundamentals and long-term growth don't wait for certainty—they move with clarity. 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These do not represent the views of the Economic Times)
