On the back of its new electoral mandate, the Modi Sarkar 2.0 government presented its first budget on 5 July 2019 (for further details please see "Budget 2019: a box of possibilities").(1) The budget focuses primarily on infrastructure spending and boosting investment from private and foreign investors, with the government forecasting that the Indian economy will grow to $5 trillion by 2025, almost twice its current size. Following the budget announcement, a slew of reforms and policies are expected in the coming months, including a draft of the much-awaited Direct Tax Code, which aims to overhaul the existing direct tax law.

This article highlights some of the key capital market-related amendments introduced by the budget.(2)

Increased public shareholdings in listed companies

The finance minister has proposed that the minimum public shareholding in listed companies should be increased to 35% from the existing requirement of 25% after consultation with the Indian securities market regulator. While the move aims to enhance liquidity in secondary markets and give the public greater control over listed companies, it remains to be seen how Indian listed companies, which are predominantly family driven, will meet the requirements while ensuring that their stock price is not adversely affected. However, the disinvestment process is likely to present attractive investment opportunities to foreign investors that wish to invest in efficiently managed family businesses.

Social stock exchange

The finance minister has proposed establishing a 'social stock exchange' (ie, an electronic fundraising platform). The objective of this exchange would be to list social enterprises and voluntary organisations with a social welfare objective so that they can raise capital. To date, India has been averse to foreign funds for non-profit activities and any such foreign investment has been highly regulated to ensure that foreign funds are not diverted for unwarranted purposes. While further details on the proposed platform are awaited, it remains to be seen whether the government will be open to attracting foreign investors in companies to be listed on the social platform, which would be a first for any government body across the globe.


The proposed changes to India's laws and policies indicate the direction in which the new government wishes to move. If the proposed changes are implemented as planned, the 7% growth projected by the government's economic survey should be achievable.


(1) This article is part of a series on the key changes introduced by Budget 2019. For further details, please see:

(2) Further information is available here.

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