Questions over the strength of India’s economic growth have grown louder in recent years, with analysts warning that some of its traditional pillars — private consumption and services exports — are facing mounting pressure.
For small investors, the concern is not just about short-term volatility but a deeper structural cycle. Modest wage growth can lead to weaker household savings, limiting investment capacity, which in turn dampens income growth and consumption. Breaking this loop is proving difficult, and policymakers face the challenge of sustaining momentum without overstretching fiscal resources.
Equity markets reflect this unease. Indian indices have underperformed several global peers, and sectoral trends appear increasingly uneven.
The consumption sector, long viewed as a defensive haven in a country of 1.4 billion people, has delivered less than 5% compound annual returns over the past three years, including dividends. For many investors, that is a surprisingly muted performance.
Technology, another former outperformer, is also under scrutiny. The NIFTY IT index has fallen by around 22% over the past year, amid concerns over slowing global demand and uncertainty around the future of legacy IT services.
Meanwhile, the power sector, buoyed by optimism around manufacturing growth, data centres and electrification, now faces short-term oversupply risks. Without a meaningful pickup in demand, valuations could come under pressure.
Real estate has been a relative bright spot. The NIFTY Realty index has delivered roughly 27% annual returns over three years. Yet some analysts suggest the cycle may be peaking, raising concerns for households heavily exposed to property investments.
Financial services — the largest component of India’s equity market — presents another dilemma. Household savings have softened while debt levels have risen. Recent data show credit growth outpacing deposit growth, widening the credit-deposit gap and prompting worries about potential systemic stress.
