Overview
Bank of America (BofA) released an analysis outlining four reform themes that it expects to influence the performance of Indian equities. The themes cover tax and labour reforms, energy‑security measures, capital‑market deepening, and regulatory easing for banks, with each theme linked to specific policy actions taken between 2025 and 2026.
Tax and Labour Reforms
In September 2025 the GST Council reduced the goods‑and‑services tax structure to two slabs—5% and 18%—lowering levies on automobiles, consumer durables and healthcare. In April 2026 the government raised the personal income‑tax exemption threshold to ₹1.2 million, a change projected to add more than ₹1 trillion to household disposable income. Parallelly, in November 2025 the authorities consolidated 29 existing labour statutes into four comprehensive codes, introducing a statutory minimum wage, simplifying lay‑off procedures for larger firms and mandating social‑security coverage for gig‑economy workers, all aimed at formalising the largely informal workforce.
Energy Security Initiatives
Responding to supply disruptions from the West‑Asia crisis, the government modernised oil and gas exploration regulations between March and July 2025, extending lease tenures and relaxing penalty provisions to revive upstream investment. It also approved viability‑gap funding for battery‑storage projects to aid renewable‑energy integration. In May 2026 a ₹375 billion subsidy for coal‑gasification projects was announced to reduce reliance on imported methanol and fertiliser inputs. Additionally, a tax holiday extending to 2047 was offered to foreign cloud‑service providers that operate data centres in India, intended to attract capital into digital‑infrastructure assets.
Capital‑Market Deepening and Foreign Access
The insurance sector saw its foreign‑direct‑investment (FDI) ceiling lifted to 100% from 74% in December 2025, a move designed to draw global capital and improve the sector’s low penetration relative to other Asian markets. The Reserve Bank of India (RBI) broadened incentives for foreign‑currency deposits in June 2026, providing full hedging‑cost support with the objective of attracting roughly $60 billion of inflows. Concurrently, limits on foreign investment in government securities were eased and the cap on overseas individual holdings in listed equities was raised to 24% from the previous 10%.
RBI Regulatory Easing for Banks
The RBI introduced a set of regulatory adjustments targeting banks. It clarified the rules governing business overlap between banks and their group entities, a clarification that benefits institutions such as HDFC Bank, which has ties to HDB Financial Services. The central bank also relaxed norms on banks’ exposure to capital‑market activities, granting them greater latitude to finance acquisitions, real‑estate investment trusts and public offerings.
Outlook and Watch‑List
BofA indicated that future reform momentum may focus on more complex, high‑impact areas, notably a pending overhaul of power‑distribution regulations (a draft electricity bill remains unlegislated) and the expansion of India’s electronics‑manufacturing ecosystem beyond assembly into component production.
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