Samir Arora and Neelkanth Mishra have offered differing views on whether tax cuts could help bring foreign institutional investors, or FIIs, back to Indian equities. While Arora sees lower taxes as a way to make India more competitive for foreign capital, Mishra believes higher returns in the US and India's complex regulations are bigger challenges.
Neelkanth Mishra: Tax Cuts Won't Bring FIIs Back
According to media reports, Neelkanth Mishra has argued that cutting taxes alone may not reverse foreign outflows, as investors weigh returns across markets and the administrative burden of investing in India.
The difference in bond yields illustrates the challenge. Mishra cited an example in which US yields rise from 2% to 5.3%, while Indian yields move from 8% to 7.3%. In this scenario, India's yield advantage narrows from 6 percentage points to just 2 percentage points, reducing the incentive for investors to choose Indian assets over US securities.
Mishra also highlighted the administrative overhead involved in investing in India, including paperwork, complicated procedures, and unclear regulations. He argued that simpler processes, clearer rules, and faster decision-making could do more to improve India's appeal than tax cuts alone, according to a media report.
Currency pressures also reflect the broader challenge, as Mishra pointed to an $18 billion balance of payments deficit in the second half of fiscal 2026, against $75 billion in Reserve Bank of India intervention in the foreign exchange market over the period.
Also Read: FIIs Sell 84% Of Two-Month Buying In September, Raise Relative Weight In Financials: CLSA
Samir Arora: Why Should Taxes Not Matter?
Samir Arora, founder of Helios Capital, argued in a post on X that taxes influence investment decisions, particularly when investors have alternatives offering better returns.
Referring to California, Arora said billionaires were leaving the state, selling their homes, and cutting ties because of one-time taxes. “How can taxes not matter?” he asked.
Arora argued that if the US offers higher returns and India wants to compete for foreign capital, lower taxes could be one tool to improve its appeal. He also questioned why India should maintain taxes that are out of line with those foreign investors face in other countries, including when investing in the US.
What Could Attract Foreign Capital?
The differing views highlight two aspects of India's competition for global investment. Arora sees taxation as a policy lever that could improve India's relative attractiveness, particularly when foreign investors have access to markets offering higher returns.
Mishra's position puts greater emphasis on investment returns and regulatory clarity. His argument suggests that simplifying procedures and making rules more predictable could be important in improving foreign investors' appetite for Indian equities.
The debate raises a key question for policymakers, and that is whether tax cuts can meaningfully reverse foreign outflows without addressing the wider concerns around returns and the ease of investing in India.
Also Read: Tax Income, Not Transactions: Nikhil Kamath's Fix For F&O Traders
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