Confidence and Momentum: Views from Our India Investor Tour
India’s economy remains resilient. Its long-term growth story is underpinned by megatrends like digitalization, favorable demographics and a reform-oriented government. We recently travelled to New Delhi, Mumbai and Bengaluru to gauge sentiment on the ground among policymakers and business leaders. We found wide-ranging confidence on the country’s economic trajectory and gained valuable insights on the opportunities and challenges likely to influence India’s long-term growth story. Here are our takeaways from the trip:
Strategic reforms, solid foundations
India’s government remains focused on driving economic growth through key reforms. There is a sense of policy continuity and stability following recent elections. Flagship initiatives such as “Make in India” and production-linked incentive schemes continue to attract investment and position the country as a global manufacturing hub. Considerable progress has already been made in electronics, for instance, where there is an ambitious target to grow the sector into a $500 billion industry by 2030 focusing on manufacturing production, including semiconductors. Streamlined taxation, labor reforms and new real estate regulations have also strengthened India’s economic foundations.
Despite considerable economic progress, nearly 129 million people still live in extreme poverty with incomes below $2.15 per day. Low female participation in the labor force also remains a challenge and there is a growing need to “upskill” employees to create high quality jobs in manufacturing and services. Encouragingly, India is embracing a culture of entrepreneurship (over 100,000 startups have emerged since 2016) and this is helping to drive economic growth and employment, while creating a broad and diverse potential investment opportunity set. Founders of innovative startups are constructive on government efforts to support fledging companies operating in areas like e-commerce, fintech and IT services. We met with the management teams of companies founded over a decade ago that have transformed into significant success stories, including an online food delivery platform now serving 800+ cities and employing (directly and indirectly) nearly half a million people.
The big infrastructure buildout
The buildout of core infrastructure projects across India (airports, roads, railway and power) is backed by increased levels of government capital expenditure aimed at driving economic development. Advances in technology and improved land acquisition processes have also green-lit large-scale railway electrification, airport privatization, freight corridors and metro projects across states. In addition, India is rapidly developing renewable energy projects with specific plans to expand solar capacity, reduce green hydrogen costs and increase energy sustainability. We met with companies advancing green building practices and pollution control, and firms poised to benefit from hybrid and electric vehicle adoption—an area backed by government incentives to boost sustainable mobility. We had the opportunity to engage with the co-founder and CEO of a business manufacturing electric vehicle components (motors, software, cells, and electronics) in-house, emulating vertically integrated giants.
Urbanization remains a challenge for India. A third of India’s total population resides in cities, but this is rising rapidly and straining infrastructure and resource distribution. India’s southern states—the main geographical beneficiaries of services and manufacturing booms—have twice the per capita income as more populous and rural northern states, highlighting disparities in infrastructure development and education. Bridging this gap will be critical for inclusive growth across the country. We heard from corporate executives on how Indian society is gradually shifting from traditional joint family structures to more nuclear households, boosting demand for residential real estate. We also sat down with the chairman of a company deeply involved in major infrastructure projects to hear more about how the business is upskilling workers and embracing digital tools in construction to modernize processes.
Tech and digital advancement
India has embraced innovation over the last decade. There has been a rapid increase in internet access, resulting in a rise of online and mobile banking and innovation across payments and e-commerce. Corporate leaders expect these trends to continue at pace and executives we met expressed optimism regarding India’s internet growth and consumer shifts towards mobile-driven e-commerce. The JAM Trinity—Jan Dhan accounts (zero balance bank accounts), Aadhaar (biometric-based unique identity system), and Mobile connectivity—has been critical to India’s digital leap. Traditional banking models fail to address the needs of India’s lower-middle-class consumers, creating new potential opportunities for fintech innovation.
India equity markets have also witnessed a significant rise in domestic retail participation owing to easier access to trading platforms introduced by new age fintech companies, growing financial literacy and favorable regulations. Financial inclusion has surged in the last decade, driving retail participation with over 105 million investors today, from just 10 million in 2013. Domestic investors have been the bedrock of Indian equity market in the post-COVID era, offering stability during periods of foreign institutional investor outflows and counterbalancing global uncertainties. India’s younger demographic is increasingly showing preference for financial assets over traditional ones like gold and real estate with lower transaction costs and digital access driving this trend.
Beyond finance, Global Capability Centres (offshore units of multinational corporations) highlight India’s dynamic IT landscape. In Bengaluru, a single 13-mile stretch of the city contains the highest number of S&P 1000 companies in the world. India is also a potential beneficiary of artificial intelligence (AI). We met with companies partnering with retailers on machine learning tools and firms looking to expand their data center footprint significantly to meet AI power demand. However, AI implementation is nascent, and a roadmap may be required for AI to coexist with human jobs. India’s pharma outsourcing market also holds significant potential, with advantages in talent cost, English-speaking scientists, and a growing focus on innovation.
Stronger-for-Longer
Our India investor tour has reinforced our 2025 Outlook views. We regard India’s economy as a stronger-for-longer growth story backed by a diverse corporate universe. CEO confidence is growing and supported by tailwinds such as digitalization, growth of an affluent middle class and a reform-oriented government. Ongoing global challenges like conflict in Europe and the Middle East, supply chain disruptions, and modern technologies like AI create both potential investment opportunities and risks. In our view, India is less at risk of a fallout from global trade tensions, which could be impacted in Donald Trump’s second US presidential term. Indian companies already enjoy good supply chain diversification, and many executives we met with continue to take greater control of their supply chains to maximize efficiency and resiliency—from procurement to distribution. We advocate an active approach to best identify potential opportunities to invest into India’s stronger-for-longer growth story.
Goldman Sachs Asset Management’s Fundamental Equity seeks to capture the growth potential of India’s economy. Our experienced, locally based team uses fundamental approaches to invest in a diverse set of companies for the long term, including beneficiaries of trends like digitalization, urbanization and shifting supply chains.
