By- Sachin Sawrikar, Founder and Managing Partner of the INR 9000 crore Artha Bharat Investment Managers
The rupee’s slide to fresh lows near 92 against the US dollar, despite the Economic Survey’s assertion of undervaluation, highlights a growing disconnect between India’s macroeconomic narrative and market realities. Weak equity returns and sustained underperformance relative to emerging market peers, Asia, and the US have diminished India’s relative attractiveness at a time when global capital is becoming increasingly selective.
Persistent currency depreciation further erodes dollar-denominated returns, even when domestic fundamentals appear resilient. For foreign portfolio investors (FPIs), this challenge is compounded by a structural tax asymmetry: capital gains are calculated and taxed in rupee terms, while actual economic returns and losses are realised in US dollars. The lack of clarity and rationalisation around long-term and short-term capital gains taxation adds another layer of uncertainty, directly impairing post-tax, risk-adjusted returns.
As competing markets actively recalibrate tax frameworks and policy regimes to attract global capital, India’s relative policy inertia risks intensifying sustained FPI outflows. Clear, predictable taxation and a credible commitment to capital-friendly reforms are essential to restoring investor confidence and improving the outlook for foreign inflows into Indian markets.
