In a podcast discussion with The Wire’s Founding Editor Sidharth Bhatia, veteran investment manager Ajit Dayal says that the reason foreign money is moving out of Indian stock markets is not associated with profits but because right now, taxation and currency is against them. According to Dayal, who has been engaging with FPIs for over 35 years, they had adjusted to the idea of the depreciation of the Indian rupee against the dollar. The other reason, he says, is the long-term capital gains tax. All of which makes it unattractive to invest in countries like India, especially with US bond rates inching up. India needs to make investing and spending here attractive, Dayal says. The following is a full transcript of the conversation. It has been edited lightly for clarity.§Siddharth Bhatia: Hello and welcome to The Wire Talks. I am Siddharth Bhatia. India was a favourite among emerging markets for foreign portfolio investors for several years. Even during many global crises such as SARS, the collapse of Lehman Brothers, and COVID, FPI funds continued to flow into India, and foreign investors made good profits here. But things have changed. Instead of inflows, FPIs are selling and getting out, and the reasons are many. Recently, Ajit Dayal, who is a veteran in engaging with FPIs, wrote an article in which he discussed why this is happening. He also knows the mutual fund industry inside out. He started Quantum Advisors in 1990 to encourage foreign portfolio investors to allocate capital to India. This was before the 1991 reforms. He then set up Quantum Mutual Fund, and he was named Equity Analyst of the Year by Asiamoney in the 1990s. Dayal says he has never seen such pessimism about India as at the present moment. He joins us today to discuss what the FPIs are saying to him, privately and perhaps publicly too. Ajit Dayal, welcome to The Wire Talks.Ajit Dayal: Thank you, Siddharth, for having me.Siddharth Bhatia: Your recent piece about foreign portfolio investors who have been regularly investing in India says the mood among them is one of dismay and irritation. These are strong words. What do you mean by that? What are they telling you?Ajit Dayal: Let us go back a long way in history. From 1980 till now, we have had 12 governments, seven of which were coalition governments and five of which were single-party governments. Across these 45 years and 12 governments, India’s annualised real GDP growth has averaged 6.3% per annum, which is a fantastic number. It is more than twice the global GDP growth rate.Economic and financial theory holds that in a country where GDP is growing, companies’ revenues are growing, because the sales of companies are a component of GDP. It is a nice symbiotic relationship. When the revenues of companies grow, operating profits grow. When operating profits grow, earnings per share grow. When earnings per share grow, stock market prices grow. That is the simple, but not simplistic, connection between GDP and returns. So we have had 45 fantastic years of tailwinds, with great GDP growth and great stock market returns. As the economy became more widely discovered, things changed. In 1990, when I started Quantum 36 years ago, India was a closed economy. There had been no reforms, and there was nothing like an FPI or an FII, a foreign institutional investor, in those days. The partial discovery of India in the 1980s, the late 1980s, came through single-country funds. There was an India fund set up by UTI, and others set up by Canara Bank and State Bank of India, but these were few and far between. There was no widespread understanding of India. In 1991, after the reforms, Quantum and a few other funds like us went out and talked about India, and converted ignorance into information and then into knowledge.Over the decades, across many cycles, whenever there was a hiccup in flows, whether it was the Lehman bankruptcy or, as recently as COVID, when there was a knee-jerk reaction to sell India because people were unsure what would happen in the near term, foreign investors came back with a bang. They came back with a surge of interest and buying. More recently, since September 2024, when the market peaked, foreign investors have been getting out, and we have not seen them return to the Indian market. The reason I use words like irritation and dismay is that they have moved from ignorance to knowledge and then to expectation. India has to be very clear. Yes, we must encourage domestic investors to invest in mutual funds or direct stocks, but we also need capital as a country to grow at a higher rate than the 6 to 6.5% we could achieve without foreign capital. Foreign capital allows us to pierce perhaps an 8% rate of real growth for decades to come. For that, we need foreign capital, make no mistake about it. If you want foreign capital, then in our Indian culture we always say we treat the guest well. We need to learn to treat the guest well. Right now, with taxation and the currency against them, they do not feel very welcome in India. Hence the dismay.Siddharth Bhatia: But some of these factors you have mentioned, the rupee sliding down and some of the taxation, most people I have heard are talking about the long-term capital gains tax, which is an irritant of some sort. There may be others too. These existed in the past as well. So what has suddenly happened?Ajit Dayal: Sure. From 1966 until recently, the Indian currency lost approximately 2.5 to 2.75% against the dollar year on year, on average. So when we went out messaging the India story and the potential rate of returns, we told foreign investors, “Just assume that for the next couple of decades, or at least for the next decade, India will have a weak currency, and you should discount your expected returns by that 2.5 to 2.75% FX loss of the rupee against the dollar.” Of course, we have lost more against the Swiss franc and others, but in general against the dollar, since that is the global currency for now. They have accepted that. But recent currency depreciation since March 2025 has accelerated way beyond this long-term average of 2.5 to 2.7%. It has gone to over 5% annualised. That is a problem. That is one thing.Also read: State of the Economy: Foreign Money Retreats From Indian Equities, Manufacturing Growth EasesThe other is the long-term capital gains tax. India’s treatment of foreign capital has changed across governments. No matter which political party was in power, or was making policy, or was influencing the taxation policy of the regulator SEBI and now the RBI, they were always unsure about how to treat foreign capital. We had tax treaties with Mauritius and Singapore, and many international investors, many of our clients, took advantage of them and did not pay capital gains tax. The tax was there, but investors coming from Mauritius and Singapore were exempt. That was removed over a decade ago, and then they started tweaking the taxation, including how much the long-term rate would be, the short-term rate, and the holding durations. This uncertainty in taxation policy was largely ignored in an environment where global interest rates were low to negative. Pension funds and sovereign funds, and hold on to your seat belts, have over 100 trillion dollars of capital between them. They need to earn a return of roughly 7 to 8% in dollars to pay for their obligations. If you are a fund managing money for pensioners, your obligation is to pay out a pension for as long as they live. If you are a sovereign fund, you want to invest for future generations. So a 7 to 8% dollar return, on a compounded basis, is very welcome to these large pools of long-term capital. When interest rates around the world remained subdued and low after Lehman and again after COVID, it did not really matter what the taxation was. If you invested in US dollars, you got a return of just 1 to 1.5% until 2018, which is way short of your 7% requirement. So you sought out destinations like India, where GDP was growing, and where, given the connection I indicated between GDP, company revenues, earnings per share, and share prices, you were getting a 15 to 15.5% annualised return in rupee terms from Indian stock markets.If you took away 2 to 2.5% for currency, that was still a 13% annualised return in rupee terms. If you then took a tax of 12.5%, assuming a long-term rate for a long-term investor, that would cost perhaps 1.5%. So you still made more than 11% annualised in dollar terms. Compare that with putting money in a US bank deposit, or in a bond in Germany, which actually had negative interest rates, or in Switzerland, where it was attractive.So what has changed is not oil and it is not AI. Those are cyclical, fancy factors that go away and come back. There has been a structural shift, and it is ongoing. If interest rates in America are now 5% on the 10-year bond and roughly 4.5% on a 2-year government bond, and my bank is giving me 5.5 or 6% in dollar terms, then a bulk of my 100 trillion dollars will go to that safer bank deposit right around the corner. Then I will allocate some money to gamble or speculate, and I use those words lightly, to try to get higher returns. That means investing outside my home country and taking on currency risk, government policy risk, taxation risk, and the risk of going to unknown markets. I will put some money outside the US and my home market.So there has been a significant structural shift over the last few years, since 2020, and more recently 2022 and 2023, when rates started increasing in the US. You have also seen it in Japan over the course of this year, where rates have gone from nothing to over 2%, which by Japanese standards is an extremely high rate of interest. There has been a structural change, and policy makers need to recognise that they need to respond to it. They cannot use an old playbook in a new field. The field has changed completely, and it is for them to decide whether they need global capital. If they do, they need to compete for global capital.Siddharth Bhatia: So, Ajit, what I am getting from this, setting the technical terms aside for a moment, is that foreign portfolio investors are saying India, with its somewhat erratic taxation and other policies, and with its governance issues and structural problems, which you mentioned, is not making itself attractive for them. You made a lot of money over the years and now this has come. Are you saying, therefore, that there is something inherently wrong in the way Indian policy makers are reacting to what is happening around the world?Ajit Dayal: Yes, they are, in the sense that, as I mentioned, if interest rates around the world are 0% or 1% and you offer an 11% dollar return, that is attractive. Now, if your currency is going to knock off another 3%, your 11% dollar return from India becomes 8%. With the US bond at 5% and on its way to 6%, the spread, which is the difference between what you earn in India (8%) and what you could earn in the US (6%), is only 2%. That 2% is not worth the risk. It is not worth the effort.As one investor told me, it is not about ROE. In our language in finance, ROE is return on equity, meaning how profitable a company is for the equity invested in its business. From the perspective of a foreign portfolio investor, with the entire world at their feet in terms of where they can invest, home market plus the rest of the world, they are looking for a different ROE, which is return on effort. There is the effort they have to make to fly thousands of miles to India. Of course, we have great airports and they love the airports when they come to India. They love Indian food, which will make us a soft power, I assume. They love the Indian GDP story. That is not the problem.The problem is translating that GDP story, from a portfolio investor’s perspective, into an adjusted rate of return, which is your return from stock markets minus taxes and minus currency losses. If you are left with 8% in US dollars and you compare that with 5 to 6% in US dollars, there is no return on effort from their perspective.Also read: Rs 3.08 Lakh Crore Foreign Portfolio Investments Fled From India So Far in 2026I would like to add another point. Consider the entire global market capitalisation, the market value of every stock exchange in the world, as captured by the MSCI All Country World Index, one of the largest index providers in the world. India’s weight in that index is 1.5% and declining. It declines because our index goes down and because the rupee goes down. Now, if out of $100 I have to fly tens of thousands of miles, multiple times, to find companies to invest in, and that is only $1.5 of my entire portfolio, I have $100 to invest around the world. I put $1.5 in India, and for that $1.5 I am getting an extra 2% return. It is not worth it at all. And I have not even talked about the protection of minority shareholders, which you briefly referred to and which is about governance. That is another factor putting people off. So yes, it is AI. Yes, it is oil. But the AI trade will self-correct sooner rather than later, is my hunch. With oil, no one knows what is going to happen. Oil prices can shoot up and can come down. But India has lived with oil shocks before. In 2013, when Ben Bernanke was doing what was called the twist, where he was planning to raise interest rates for the first time after the Lehman collapse, every central banker in the world had given money away for free to rescue the real economy and the financial economy. At that point, India’s current account deficit, which is the difference between the dollars we receive from everywhere in the world and the dollars we spend on all our imports, oil and everything else, was roughly negative 5.5%, about 5% of GDP. This imbalance of dollar flows compared to GDP was about 5% of GDP in 2013. Today, that number is less than 1%.If you looked at just those economic factors, there is no reason for people to panic and sell out of India. This is not panic. The Ben Bernanke twist was a panic reaction. That was a country that needed dollars, when dollars were getting more expensive. That is not the case here. Today’s current account deficit is about 1% of GDP, one fifth of what it was in 2013. And yet the selling is relentless, and there is no sign of it stopping. As of now, people are waiting for a signal, and not from AI and not from oil. Those will help, but they are smaller catalysts. To get back on the radar of the chief investment officers of the pension funds and sovereign funds, you need to get the tax regime and the currency regime right. Then low oil helps, and then the AI bubble deflating helps.Siddharth Bhatia: Assuming that tomorrow, and this is outlandish, there is some kind of adjustment to the long-term capital gains tax, and you know that the government of India collects a lot of money through it, so if that were to go away it would be quite a big hit. But assuming they make some adjustments, are you suggesting that foreign portfolio investors will come rushing back?Ajit Dayal: I think two things will happen. When you say adjustment, I am getting WhatsApp messages that there may be a revision in policy to tax only the dollar gain. That would take away the currency loss, because right now the currency loss is also effectively taxed. Because you measure dollar to dollar, suppose I bring in $10 in 2024 and the share market goes up but the rupee becomes weak. I convert my higher share price back into dollars. If it is $9, I do not pay tax. If it is $10, I do not pay tax. If it is $11, I pay tax. So it would be tax on the dollar gain.If they do that, it will be a half-hearted approach to policy making, because there is another factor we should recognize. If you and I, sitting in India, invest in the stock market in the US, and we are not US citizens, US residents, or US green card holders, and we buy and sell shares in the US and make a profit, we pay zero tax in America. We declare the profit to the income tax authorities in India in our filing, and at the Indian filing level we pay a tax. So, as a matter of principle, capital is taxed at the source from which it originated, not at the point where it makes a profit. From what I understand, we are the only significant economy in the OECD world that taxes profits at the place where the profit is made, as opposed to the place where the capital originates. Now, I mentioned pension funds and sovereign funds. When you talk to policy makers here in India, they say, “That is fine. They can pay the tax here and get a tax credit under what is called a double taxation agreement.” We have these with many countries in the world. What they forget is that these entities, the pension funds, foundations, university foundations, private foundations, and sovereign wealth funds, are tax-free entities in their home countries. So what do they offset the tax against? There is no tax that they are paying in those home countries. The policy makers are missing the point completely. They have to abolish the tax if they really want people to get excited about India.I will put one other factoid out there. Across governments, it does not matter what the political party is. We have had some fantastic policy and some poor policy. Net net, India’s weight in the All Country World Index that I referred to, which represents global stock markets, was 0.05% in 1990. We went as high as 1.18 or 1.19% two years ago, and now we are hovering somewhere between 1.4 and 1.5%, depending on where the currency is, where the AI trade is, and where other global markets are. So we have had a phenomenal surge in the representation of India in people’s portfolios, a phenomenal surge in our GDP, and a phenomenal surge in interest in India. And we are shooting ourselves in the foot by saying, “Let us collect tax from you.” We do not pay tax when we make money in their countries. Why should they pay tax in our country? Why are we violating these OECD practices?Siddharth Bhatia: But as an investor, if I hold a stock for over two years, three years, whatever, and I make a profit, I pay long-term capital gains tax. Why wouldn’t any other investor, foreign or Indian, also do that?Ajit Dayal: I will tell you this. If you are a US citizen, you pay tax in America. Let me break this whole “what about you” argument, which sadly goes all over the world and all over India for sure. An American citizen pays tax in the US. Ajit Dayal does not pay tax on the profit there. He does not write to his government saying, “Hey, that is not fair.” He is not lobbying the government saying, “That is not fair.” This is international practice. That is the way it functions. You can ask, “Why should a foreigner pay tax here?” But the American pays tax in the US, and I do not pay tax in the US if I make a gain there. If I were to buy and sell shares in America, I would not be paying tax, while Mr. Joe Ball would be paying tax in the US. That is the way it is. Again, it goes back to policy decisions and the objective. If you allow me, I will go on.Siddharth Bhatia: Yes, go ahead.Ajit Dayal: If your objective is to grow the economy more, one of the things you need is more capital. The other is to ensure that young people are getting jobs and contributing to GDP. Either one alone will not grow GDP. Both together will lead to a fantastically prosperous India. India has been on a phenomenal run for the last 45 years across 12 governments.Since we are talking about 12 governments, there is a perception among foreign investors, and maybe among Indian investors too, that every time there is a single-party government, India will do well. Actually, and these are not my statistics but Government of India statistics, of these 12 governments, five were single-party. Of those five single-party governments, no matter who the main party was, Congress or BJP, only one out of five could be said to have delivered GDP growth above the long-term average of 6.3% while in power. Four out of five delivered subpar growth while they were in power as strong single parties. Even the one that did, which was Prime Minister Modi’s first term, with a nice rate of growth, falls below the long-term average if you readjust for the statistical base revision, which was initiated by the Congress government while it was still in power and rightfully adopted by the Modi government, and you make a like-for-like comparison. So really, to be honest, the score is 0 out of 5. None of the five single-party governments has done better than the long-term average. On the other side, four out of seven coalitions have given a better return than the long-term average. So it is not about politics. It is about the policy making of the politics.Siddharth Bhatia: Ajit, may I remind you that at this moment we have a coalition government. By that token, it should be delivered. What we have seen, unfortunately, is economic drift, and we are not talking about foreign portfolio investors alone but about several things. I will not say mishandling, but some kind of casual approach in the last few years. So this is an example of a coalition government which has failed.Ajit Dayal: No, you are wrong. I am going to correct you live on TV in this interview. For this coalition government, which has had a short tenure so far, from June 2024 until now, the GDP growth rate we are seeing is higher than the long-term average. So it supports the fact that coalition governments do better. However, as I indicated, policy making also has to be right. To be fair to this government, the surge in interest rates has happened recently. A new RBI governor took office in December 2024. In March 2025, the RBI governor, his team, and I guess all economists agreed with this statement. I have only studied economics at the bachelor’s level, so I do not want to fight with the PhDs and doctors of economics. The governor gave an interview effectively saying that it would be okay if the rupee weakened a bit, because it was too strong. He made that statement in March 2025, from what I remember. When he made that statement, the young kids manning foreign exchange trading desks went for the hunt. They went for the kill. If you hear a central bank governor telling you that his currency is a little strong and should weaken, you act on it. And he was absolutely right. Our currency had strengthened against the Chinese renminbi, the yen, the Korean won, and the Sri Lankan currency. We had a stronger currency, and if you are trying to boost exports, you need a weaker currency. So the statement was genuine, supported by data, and supportive of the need to export more.The timing, however, was unfortunate. On April 2nd, 2025, a few weeks later, President Donald Trump came on TV with a massive board and showed his tariff rates on what he called Liberation Day. In the world we live in today, you cannot build an economy based on exports, because the one theme emerging everywhere in the world is how to be less reliant on someone else and more reliant on what one can do within one’s own borders. So trying to weaken your currency to boost exports is, in my view, a losing proposition. Again, I am a BA in economics and not a PhD. What actually determines wealth creation is the flow of capital, and the flow of capital is what you need to respect. If you weaken the currency, you may help the exporter, who now faces tariffs no matter where they try to export in the world, but you are punishing the capital of the person who is bringing capital to your country to help you develop. That sounds like a very unfair trade, which is why it comes down to return on effort and return on investment for that foreign investor. So in an FDI versus FPI world, and it is not actually versus, you need to make sure that the multinational bringing money in to build factories or GCCs, and the portfolio investor bringing money for venture capital, private equity, real estate, infrastructure, and listed stocks, are not penalised by the thought process of “let us weaken the currency to help the exporters and boost India’s global share of trade.” Those days are gone. It is all about capital flows and technology flows now.Siddharth Bhatia: One of the things you say in your piece intrigued me. You wrote that AI now means “Arrogant India.” What I take away from that is that we are simply refusing to acknowledge that a problem exists. Would you say that?Ajit Dayal: I would say there is a belief that millions of people are waiting to buy shares in Indian stock markets, invest in Indian assets, and set up factories. China Plus One did not really work out. It really was China Plus Vietnam, and we may be Plus Three or Plus Four. The geopolitical environment that led multinationals to depend less on China for sourcing their raw materials and intermediate goods did not work out for us. That benefit went to Vietnam. We will benefit some, and we have benefited some, but it has not worked out as hoped.The other aspect is this, and again, this is great data. In the early 1990s, we had fewer than 500 registered foreign portfolio investors. Today we have 12,000 to 15,000 and growing. The registrations are growing, but just because more people are registered, we should not assume that they are actually ready to invest. They are keen to invest, but they are not ready to invest. So we are arrogant and tone-deaf to the extent that we do not recognise the changes in the world environment. I have had a very brief discussion with economics professors and economists, PhDs who are extremely well known around the world, and they pooh-poohed me, saying, “You do not know what you are talking about.” But I can see the flaws. Foreign direct investors and multinationals looking for 20 to 30-year investments in India, and foreign portfolio investors with perhaps a 1-year to 5-year horizon in listed stocks, or 5 to 10 years in debt, venture capital, private equity, and real estate, do not like the environment they are going into, which involves currency punishment and taxation.So, in short, yes, we are arrogant. We believe there is capital out there that is willing to come to India. We have to compete for capital. We have to compete for mind share. We have all the makings of government policy, with the ease of doing business and the many frequent trips made outside India to fly the flag of India high. All that is wonderful. But when people look at the details, and those who have sold out of India recently look at their tax bill on capital gains, they say, “Where did that come from?” They were not paying a tax until they actually went to sell, and then they realised, “Oops, I have to pay all this tax.” So we need to change the way we look at the world.Siddharth Bhatia: Suppose you were called in to give advice to the policy makers in the various ministries, such as the finance ministry. What would be the three points you would give, after talking to so many people? You have more access, some sort of direct day-to-day contact with these people. They talk to you, you know them, and they are candid with you. Incidentally, what you have said in your article is something I have read in two or three other places as well. What are the two or three points you would give, quickly?Ajit Dayal: Sure. The first is currency. You have to take a stance not to try to weaken your currency as an official policy. The official policy was a nudge, and now we have to change that. We have to give a nudge that we need to strengthen the currency. It is one thing to say it, which is a good signal, but now you have to find the money to do it. The way to find the money is for people to demand your rupee. Who can demand your rupee? The foreign investor who wants to buy your shares. They give dollars to the Reserve Bank of India, the RBI gives them rupees, and they use the rupees to settle a trade on the Bombay Stock Exchange. You also need demand for rupees from the multinationals who want to set up factories or GCCs, and from the private equity, venture capital, and listed equity investors who need rupees to settle a trade, because that is the settlement currency of India. So you signal that you expect the rupee to be stronger. You do not need a 500 billion dollar war chest to make the rupee stronger. You need to get tens of billions of dollars of inflows.I will give you one statistic. There are about 250 to 300 trillion US dollars of capital around the world owned by pension funds, sovereign funds, individuals, HNIs, retail investors buying mutual funds abroad, family offices, and foundations. Our estimate is that if these investors were to hold an allocation to India equal to its MSCI All Country weight of 1.5% of their entire global pool of financial assets, they should have anywhere between 3 and 4.5 trillion US dollars invested at cost in India. That number today is under 1 trillion. So they should have 4 trillion, and they are only one fourth of the way to a sensible allocation for India, which would be neutral. I do not like India and I do not hate India. I am neutral to the index. We could get 2 to 2.5 to 3 trillion dollars just by making India equal weight across this entire group of investors.That is point number one, which is really two. One is currency, giving a signal that I am tired of seeing my currency weaken. I do not have 500 billion dollars to protect my currency, but I have announced the taxation position, and I have written in an Act of Parliament that never again will we tax a foreign investor on our home soil. They will pay whatever taxes they are due on the soil from where they brought the capital, not on the soil where they made the money. That is the first thing.The other part is retrospective taxation. That is ridiculous. You sign a contract effectively, and on the strength of that contract people come into a country, set up a factory, and then suddenly you say, “Actually, I have changed my mind. I do not like the terms of the contract. I am going to apply retrospective taxation from the past rather than prospectively.”Siddharth Bhatia: But that happened once or twice, right?Ajit Dayal: But that is the whole thing. It happened once or twice, and it could happen again. It could happen a second, third, fourth, and fifth time. Who knows? And again, this is not something to be put on this government’s lap. It is every government that has come into power. I will go back to the dream team of Manmohan Singh, Montek Singh Ahluwalia, and Chidambaram. Two of the three are alive, and I know one of them pretty well, though I have not met them for years. They did some wonderful things. They also did not complete the project, and they were wishy-washy on what they should do with taxation. Hence Mauritius, hence Singapore. Why create all these shelters? By creating these double taxation treaties with Mauritius and Singapore, they offshored jobs to those nations. Suddenly you had fund administrators, boards, directors, lawyers, and accountants getting employment in Mauritius and Singapore because the calculations of net asset values and profit and loss for Indian stocks were done in those nations. Why not onshore them here? Just let the whole thing be free of tax.There is a lot, and a lot, and a lot that India can do. I am not even coming to the point of tourism. We know that India gets very few tourists. I am coming now to the point of non-resident Indians. I wrote an article on this some months ago. We changed our taxation rule for an NRI from 182 days to 120 days, and there are different grades of tax liability depending on how you fall. But consider Indians my age, people I studied with in America before I came back. I came back in 1984 from the US, and many of my friends and people I know still live and work in America. Their kids are married, and they are retired. They want to come back to their home country. It is the exact ghar wapsi story that we talk about, and they want to live it. They want to come back home and stay away from cold weather. In Canada, they are called snowbirds. The snowbirds of Canada fly to Florida and Texas every winter, and under US law, a Canadian can come and live in the United States for 182 days, no questions asked, with no taxation, no global taxation, nothing. Zero. Of course, if President Trump has his way, then all the Canadians will also become Americans, but as of now they are two different nations. India has so many NRIs, millions of them, particularly in the wealthy parts of the US. Take 5 million NRIs in the US, for example. Even if 10% of those 5 million came to India in the winter months, from Thanksgiving, about now in November, to April, which is Easter, and lived here in those months, they would add 0.8% to India’s GDP every year. Just 10%, that is 500,000 Indians coming to live here, buying a property or renting a property, buying a car or renting a car, wanting a maid, getting a driver, going out to eat, traveling within India, meeting their friends. That is 0.8% of GDP from that one change. Change the number of days back to 182, and take it away from those 120 days. The 120-day limit is unnecessary.The government has many, many keys to get the economy moving to a much higher rate of growth, and not through AI. You do not need AI for all that. Do the simple stuff, and AI is a byproduct of all this. We are making AI the focal point of our investment world. Let others do that. Let others play the bubble, because it is a bubble, not only with the technology or the impact of AI but on the investment side. We have to be lucky to pick the right AI company which will do very well and make us money. Take cryptocurrencies, for example. Very few cryptocurrencies survived. Some survived and many, many failed. It will be the same story with AI. But India can fix these problems very quickly and very easily.Siddharth Bhatia: So these are policy issues, and you think they will affect FPIs as well, especially given what you mentioned about the currency. But you have to balance it against the exporters. I am not having an argument here. I am just saying that policy makers concern themselves more with domestic issues than with international ones. So I do not know about that. Do you think things are going to change?Ajit Dayal: I would like to make another slight edit to what you are saying. When I talk about NRIs coming to India, think of the money they spend. Think of a foreign multinational hotel chain which suddenly says the demand for hotels, cafes, restaurants, buses, and cars in India is increasing, and decides to set up factories and hotels in India to meet that demand. It is all related. You have a GDP that grows. You have consumers who are consuming more. It comes onto the radar of multinationals in their boardrooms, and they say, “This economy is growing. We need to capture some of that growth in our annual report, and in our multinational stock price.” They will come and invest more in India. So it is a virtuous cycle for doing nothing more than converting a 120 in your tax code to a 182. How difficult can that be? Again, that is not a policy change that you and I really care about. We do not care whether an NRI stays in India for 120 days or 182 days. You may care, as you said, because you worry that a foreign investor will pay no tax while you pay tax, but you would be wrong to worry. That is the principle of OECD taxation formats, that you pay tax at the source of your capital. That is the principle. If you want to be a gentle and nice host, you will follow principles. If you want to run, and I do not want to use the word dacoity because it is too strong a word, an extraction economy, then you are penalising people all the way, and ease of doing business does not quite fit the bill at all.This government has done many good things. I hope and I pray that it does a few more things to help NRIs, FDI, and FPI, not to benefit them but to benefit India, to benefit us.Siddharth Bhatia: So, to sum it up quickly, do you think these lessons are slowly trickling into government circles?Ajit Dayal: The facts have been known for a long time. Every time you hear a response from a policy maker, it is, “Yes, we have heard these discussions. We are reviewing them.” They have to listen more closely. They have to put their ear closer to the ground and look at the data and the statistics. Believe me, this is not AI and this is not oil. Yes, AI and oil play a role. But even if you cut taxes, keep the currency calmer, and allow the NRI rule change from 120 days to 182 days, the stock market will not fly. It will certainly bounce up, that is a given. It will fly when people start believing that this time it is different.I will end with one quote, if I may, from my side on this topic. Sir John Templeton very famously said, “There are five words in the field of investment which are extremely important. Of the five words, four you hear loud and clear all the time: ‘This time it’s different.’ The fifth word is spoken silently, even lower than a whisper, and you never hear it. And it’s ‘This time it’s different, sucker.'” So we have to make sure that policy makers are not trying to mislead or misrepresent what they wish to do. A clear clarion call: taxation is predictable. It is zero. We welcome you to India, FPI, FDI, NRI. Come and invest with us and help us grow our economy, and participate in the fruits of our development, as we have displayed over the last 45 years across 12 governments. The rates of return in India have been phenomenal, barring the last two years, which have been disastrous.Siddharth Bhatia: Ajit, thank you very much for that explanation. Some of it was technical, but I am sure our listeners will find it very interesting. I like your point that there are simple solutions, but only if people are willing to listen.Ajit Dayal: I will make one statement on this because I like what you said. I would like to draw the distinction from a Simon & Garfunkel song, between hearing without listening. I am sure that because it is The Wire, people in government will hear for sure. I just hope they listen. That is the important part, and it is not just for FDI, FPI, and NRI. It is for India, as you correctly said.Siddharth Bhatia: Thank you very much for joining us today. That was Ajit Dayal, a veteran of the Indian stock market, and more than that, a veteran when it comes to managing and engaging with foreign portfolio investors. He started Quantum Advisors many years ago, much before India even started its reforms. With a voice like his, I am sure it will carry. Again, I am not going to quote anybody, but Ajit, your voice does carry weight. Thank you once again. This was Ajit Dayal of Quantum Quantum Mutual Fund. We will be joined next week by another guest on The Wire Talks. Until then, from me and the team, goodbye.Transcribed by Ramsha Sartaj, an editorial intern at The Wire.