India’s Proposed Change to Tax Law May Slow Foreign Investments

India has proposed changing laws so it can retrospectively tax capital gains by foreign companies, a move industry analysts including Nishith M. Desai say could have a negative impact on investment in the nation.

The government’s had a “knee-jerk reaction” to this year’s loss of a $2.2 billion tax case against Vodafone Group Plc, said Desai, managing partner at law firm Nishith Desai & Associates in Mumbai. The proposed change in law “will considerably erode India’s standing in the eyes of investors and treaty partners,” he said in an e-mailed statement today.