Indian government's call for more of its people to start paying taxes hasn't gone down too well on the stock markets. Image Credit: Bloomberg

Dubai: India's stocks fell, with the benchmark index erasing earlier gains, as Prime Minister Narendra Modi said more people should be paying tax.

The S&P BSE Sensex dropped 0.2 per cent to 38,301.03 as of 1:06pm in Mumbai, after rising as much as 0.4 per cent. The NSE Nifty 50 Index declined 0.1 per cent.

Indians outside of the tax net with taxable income should come forward to pay taxes on their own, Modi saidat an event in New Delhi. The benchmark stock index erased gains as his comments were reported.

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No option but widen tax base

"With a big setback to business activity and consumer spending, the government will need to find ways to bolster its revenues," said Sameer Kalra, an investment strategist at Target Investing in Mumbai. "Taxes could be one way to do that."

With business activity stifled by lockdowns to curb the spread of coronavirus, tax collections are dwindling even as the economy relies on government spending to cushion what's expected to be the first annual contraction in 40 years.

The rupee was little changed at 74.8225 per US dollar, while the yield on the 10-year bond was little changed at 5.89 per cent.

As earnings season continues, 25 of the 38 Nifty 50-member companies that have announced results so far have beaten or matched estimates.