Parboil the baby potato in a pressure cooker or instant pot. Peel off the skin. Set them aside.
Combine curd, red chili powder, turmeric powder, coriander powder, and ¼ cup water. Whisk to a smooth, lump free consistency. Set it aside.
Heat oil in a skillet. Once the oil starts fuming, reduce the heat to low. Add bay leaf, red chilies, mustard seeds, fenugreek seeds, asafoetida, cumin, ginger, and nigella seeds. Fry for 20 - 30 seconds to release the aroma of spices.
Next, add the boiled potato. Stir fry them over high heat till crisp and golden.
Add 1 cup of water, stir to combine, cover, and bring the curry to a quick boil.
Now, with one hand, slowly add the whisked curd while with another stir the curry using a wire whisk. This step ensures there is no lump formation.
Allow the curry to simmer over low heat. Once the curry starts boiling, add salt, kasuri methi, and stir to combine. Simmer over low heat for 2 - 5 minutes. Not more than that.
Garnish the potato curry with chopped coriander.
Serve dahi potato curry with paratha or poori.