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Consensus EPS growth forecast for 2026: ~7% (conservative).
KKR expectation: Mid-teens EPS growth in 2026.
Drivers:
Fiscal impulse
Credit growth
Retirement savings participation
Monetary easing transmission
3. Currency Outlook
INR depreciation:
2015–2025 average: 3.1%
2026–2030 forecast: 1.8%
Key factors:
Trade deal with U.S.
Lower oil prices
Improved credit growth
INR REER >3 standard deviations below 10-year average (Exhibit 13)
Currency stability is seen as crucial for foreign investors who previously stayed on sidelines.
III. AI & IT Services: The Swing Factor
1. IT Sector Stress Signals
Top five IT firms added:
FY24-25 (first nine months): 17,764 net hires
FY25-26 (same period): 17 net hires
Services exports: ~$400B annually
IT services = ~50% of services exports
IT surplus 2024: $90B (2.3% of GDP)
Net services surplus overall: 4.6% of GDP
Concern:
AI-driven automation decoupling revenue from headcount.
30% of IT services could face disruption (executive estimate).
Banks hiring 50–100% more in-house tech staff, reducing outsourcing.
Yet:
600+ AI start-ups at AI Impact Expo in Delhi.
AI seen as eventual upgrade, not structural negative.
Growth of Global Capability Centers (GCCs):
~$70B in exports.
IV. Consumption: India’s Core Growth Engine
1. Structural Consumption Story
Household consumption (% of GDP, 2024 – Exhibit 7):
U.S.: 67.9%
India: 61.5%
China: 39.9%
India now:
4th largest consumption market globally (Exhibit 8).
Private consumption nearly tripled from 2015–2025.
CAGR: 10.5%
INR consumption 2.7x increase.
2. Demographics & Income Segmentation
Population:
~1.4B today.
Projected ~15% larger than China by 2035.
Working-age population to surpass 1B.
Largest millennial cohort in Asia:
328M born 1980–1994
Urban structure:
450M urban residents.
~200M meaningful discretionary consumers.
~40M earning developed-market-level incomes.
~4M extremely affluent.
Affluent households projected 5x growth this decade (Exhibit 21).
Consumption leadership shifting:
From lower-income mass market
Toward middle and upper income tiers
3. Digital Infrastructure
UPI (launched 2016):
2024 transactions: 131B
~360M per day
Digital payments becoming dominant
Smartphone users:
Surpassed 1B
Impact:
Accelerated formalization
Fintech ecosystem expansion
Reduced transaction friction
V. Capital Markets Maturation
1. Equity Markets
Market cap: >$5T
5th largest globally (Exhibit 15)
Market cap/GDP: ~124%
Alternative investments:
~$400B AUM
Buyout penetration (as % GDP):
U.S.: 2.1%
Japan: 1.0%
India: 0.7%
China: 0.4%
Buyout deal sizes rising materially over decade (Exhibit 17).
2. Private Credit
Positioning:
Complement to banks.
Flexible structuring.
Filling gaps in bespoke financing.
KKR recommends:
Convertible bond market expansion.
Relaxation of squeeze-out rules.
VI. Infrastructure Opportunity
Urbanization:
India: 35–40%
China: 60%+
Government capex:
~20% of central government fiscal expense.
Doubled under Modi administration.
2026 forecast:
11% YoY growth in capex.
Adds ~0.5 percentage points to GDP.
Focus areas:
Roads
Renewables
Transmission
Logistics
Data centers (corporate tax waiver for foreign operators)
VII. Manufacturing & Capex Cycle
1. Current Position
Manufacturing share of GDP declined:
17% → 14%
Real GDP (10-year): 5.9%
Manufacturing lagged overall GDP.
Industrial outperformance:
Metals
Pharma
Autos
Lagging:
Computer & Electrical Equipment
2. Industrial Signposts
Capacity utilization rising.
Industrial production improving YoY.
Government capex crowding-in private capex.
Wages:
India (2023) ≈ China (2000) manufacturing wages.
Higher education:
Students projected to double over next decade.
Strategy:
Selective manufacturing expansion.
Chemicals, electronics, pharma.
China+1 supply chain shift.
VIII. Structural Risks
1. AI Disruption
30% IT risk exposure estimate.
Insourcing trend.
2. Agriculture
~50% workforce
~1/6 GDP
Agrochemical use only ~10% of developed economies.
Cereal yield ~half U.S. and China (Exhibit 12).
3. Energy Policy
Needs:
Nuclear expansion
Continued coal for baseload
Disciplined renewables sequencing
Grid stability improvements
IX. Trade & Geopolitical Developments
EU trade deal: Free trade area covering nearly 2B people
U.S. deal:
Tariffs reduced 25% → 18%
Removal of 25% supplementary tariff (Russian crude-related)
Rupee appreciated ~2% after announcement.
X. Strategic Conclusions
Core Structural Themes
High-Grading World
Growth shifting from goods to services.
India positioned with strong services + consumption engine.
Consumption + Services Synergy
Rare globally.
Comparable only to U.S. in structure.
Industrial Recovery Optionality
Early capex cycle signs.
Infrastructure-led crowd-in.
Earnings Recovery Likely
Policy tailwinds
Conservative consensus
EPS upside potential
XI. Final Bottom Line
India’s model is:
Consumption-led
Services-dominant
Demographically advantaged
Increasingly capital-market mature
Despite:
AI transition risk
Agriculture inefficiency
Energy mix challenges
Equity valuation sensitivity
KKR’s conclusion:
India is not perfect, but it remains one of the most compelling long-term compounding opportunities in global capital markets.
For investors with:
Sector expertise
Local execution ability
Structural patience
The combination of:
10–11% nominal GDP
Mid-teens EPS potential
Slower INR depreciation
Deepening capital markets
Expanding affluent base
…creates what the authors view as a structurally attractive entry point in 2026.
Jul 13, 2026
Yanis Varoufakis | Closing Keynote | Thursday 18th June 2026 | Web3 Foundation
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