India may already be taxing its citizens too heavily, argues global investor and author Ruchir Sharma. In the opening episode of WTF is Finance, Sharma told Zerodha co-founder Nikhil Kamath, “Our tax to GDP ratio is in fact high. We should be less focused on extracting more taxes from people. Complying with tax is still a big challenge.” He further endorsed a simpler regime, adding, “Studies have shown that a flat tax tends to be the best way to raise more taxes.”
Four Trends Shaping Global Markets
The conversation, part of a new series on finance, covered broader themes beyond India’s tax system. Sharma laid out four macro-trends shaping global markets and economies: the outsized role of AI in America’s stock markets, Europe’s undervalued potential, India’s manufacturing opportunity, and volatile global trade and currency shifts.
On the US, Sharma was blunt: “The only reason for investing in the US today is AI. Otherwise, the rest of the world will do better than America.” He also suggested that Europe could be the surprise story of the next decade, saying, “People have really, really given up on that continent, and expectations are very low. If there’s any place where leadership can emerge to challenge the US, that’s the only place.”
India’s Manufacturing Edge and FDI Concerns
Turning to India, Sharma highlighted manufacturing as the country’s biggest opportunity. “Services dominate GDP, but those who crack manufacturing create disproportionate wealth. The number one sector today is manufacturing, number two is possibly pharma,” he said.
But foreign investment, he cautioned, remains underwhelming. “As far as FDI is concerned, undoubtedly India’s rate has been a bit disappointing,” Sharma noted. “It’s just a difficult country for a foreign investor to come and do business from the start. You’re almost happier doing a portfolio or other investment, piggybacking on the existing local person who knows how to navigate this environment.”
The wide-ranging discussion also touched on regulation, innovation, and India’s future growth drivers. Sharma’s key message, however, was clear: India needs a simpler, fairer tax system to unlock long-term prosperity.