Why is India trying to kill off the industry of domestic hedge funds?

India is killing off the one industry that can bring badly behaving tycoons into line while nudging savers away from an unproductive lust for gold. 

That industry is domestic hedge funds, which have taken seven years to reach $6 billion in investment commitments from nothing. By contrast, equity investment in India by overseas financial investors is upward of $400 billion.

Even that measly $6 billion figure for so-called Category 3 Alternative Investment Funds overstates the industry’s development. Some managers of vanilla mutual funds now seek the AiF registration to avoid regulatory restrictions on what they can pay distributors for selling to mom-and-pop