Shankar Sharma Urges India to Welcome Dollar and Set Capital Gains Tax to Zero

A Foreign-Capital Pitch Reopens India’s Debate on Investment Taxes

Shankar Sharma argues that attracting overseas dollars should take priority as India grapples with external funding needs and limited options for household savers.

The case Sharma makes for courting overseas capital

Speaking at the Smart Arena segment of the Business Standard BFSI Insight Summit 2026, Sharma said India should make entry easier for foreign investors, including through lower taxes, special investment vehicles and global roadshows. He argued that a country running a current account deficit should actively attract dollar flows, rather than place successive hurdles in their path.

His most striking suggestion was to set long-term capital gains tax at zero for foreign investors. Sharma said he pays no capital gains tax on overseas investments and pointed to the US as an example. Those comparisons are his argument for a policy change, not evidence that India has adopted one. The proposal remains a recommendation, and the article provides no indication of a government decision.

A capital-flow fix cannot replace a current-account solution

Sharma’s case links foreign investment to India’s external balances. He said that a current account surplus of 1% could provide an additional $20 billion a year, and argued that stronger capital inflows would give policymakers breathing room to address the underlying imbalance. He also described the challenge as a tension between managing exchange rates, capital flows and interest rates.

That distinction matters: attracting foreign money may help finance external needs, but it does not by itself resolve the trade and current-account pressures Sharma identifies. A tax concession could improve the appeal of Indian assets to some investors, yet its effectiveness would depend on whether overseas capital responds and whether inflows are sustained. It should therefore be seen as one possible policy lever, not a standalone solution.

His critique extends to household savings and equity risk

Sharma also challenged the push to channel ordinary savers towards equities through mutual funds. He said equity investing demands staying power and argued that investors with limited financial flexibility may struggle to withstand uneven returns. In his view, mutual funds can help, but fund size and the ability to outperform can become constraints; market returns, he cautioned, are not guaranteed.

He called for lower taxation on fixed-income investments and instruments that could deliver a positive return after inflation. Sharma said household inflation can feel higher than headline measures, leaving savers dissatisfied with fixed-income returns. He cited the rupee’s move from about 80–82 to roughly 96 and bond yields rising from 6.8% to 7.4% as part of his argument. These figures illustrate his view that currency weakness and modest yield changes can weigh on savers; they do not establish that all households or instruments have had the same experience.

The policy trade-offs investors should watch

A zero-tax regime for foreign investors would raise questions about fairness between overseas and domestic investors, as well as the potential cost of foregone tax revenue. Easier access may attract interest, but it cannot guarantee stable flows or stronger long-term investment. Sharma’s proposals also involve competing priorities: reducing barriers to foreign capital while making domestic savings less dependent on volatile assets.

He also disputed the idea that restricting gold imports necessarily resolves the savings challenge, arguing that savers seek a store of value and may redirect money into other assets. He cited roughly $60 billion in mutual-fund outflows over two years and about $80 billion for gold, without suggesting the figures are directly comparable. His broader point is that policy can influence where savings go, but investor preferences and confidence remain important.

Key Highlights

• Shankar Sharma proposed zero long-term capital gains tax for foreign investors to attract dollar capital.
• He argued that overseas inflows could provide breathing room to address India’s current-account challenge.
• His wider prescription includes lower fixed-income taxes and instruments offering positive returns after inflation.
• Sharma cautioned that equity returns are uncertain and may test the staying power of smaller investors.
• The proposals are his views; the supplied information does not indicate a government decision.

Investor Note: Sharma’s proposals frame an important debate about foreign capital, household savings and tax policy, but they are not policy announcements. Investors should assess their own risk capacity and investment horizon rather than treating the discussion as a reason to shift from equities, fixed income or gold.