Global investment firm KKR remains highly optimistic about India’s long-term consumption story, driven by robust factors like rising incomes, premiumisation, and financial deepening, despite facing immediate headwinds from energy prices and AI disruption.
Illustration: Dominic Xavier/Rediff
Key Points
- KKR maintains a positive outlook on India’s long-term growth, driven by rising incomes, premiumisation, financial deepening, and demand for quality services.
- Near-term growth in India is tempered by higher energy prices and AI disruption in legacy IT services, but the structural case for long-term investors remains strong.
- The global economy is expanding due to productivity gains and AI investments, yet faces challenges from geopolitical fragmentation and energy security concerns.
- KKR expects inflation to remain stickier than consensus in most regions outside China, influenced by goods and geopolitical shocks.
- Asia is identified as a high-conviction investment opportunity, with KKR favouring private equity, infrastructure, and corporate credit due to corporate reforms and AI spending.
Global investment firm KKR is positive about India’s long-term growth, saying rising incomes, premiumisation, financial deepening and demand for quality services continue to underpin the country’s consumption story despite challenges.
“However, higher energy prices and artificial intelligence (AI) disruption in legacy IT services are tempering near-term growth, but the structural case remains intact for long-term investors,” the private equity major said in its 2026 mid-year global macro outlook.
Global Economic Landscape and Challenges
The global economy is expanding, supported by productivity gains and AI investments even as geopolitical fragmentation, energy security concerns and strategic competition pose fresh challenges for policymakers, KKR said in a report titled “The Divergence Conundrum”.
A broadening productivity boom is extending the economic cycle, but inflation is likely to remain stickier than expected as geopolitical tensions rise and countries prioritise resilient supply chains over efficiency, the firm argued.
KKR expects inflation to remain structurally above consensus expectations in most regions outside China due to goods and geopolitical shocks. It warned that the global monetary easing cycle is losing momentum.
By the end of May 2026, 10 per cent of the world’s top 30 central banks were raising interest rates, compared with 3 per cent at the end of 2025, while only 40 per cent were still cutting rates.
Asia’s Investment Appeal and Strategic Themes
The firm, however, reiterated its bullish stance on Asia, identifying the region as one of its highest-conviction investment opportunities amid widening divergence across economies, sectors and asset classes.
“The cycle is not over, but it is becoming more selective,” said Henry McVey, KKR’s head of global macro and asset allocation, KKR.
Asia offers opportunities across private equity, infrastructure and corporate credit, supported by corporate reforms, AI infrastructure spending and consumption upgrades.
The report highlighted the “Security of Everything” theme, which extends beyond energy, food, water and critical supply chains. Governments and corporations are increasingly prioritising resilience and security, creating opportunities in infrastructure, power and strategic assets, it said.
Against this backdrop, KKR favours assets linked to nominal economic growth, including corporate carve-outs, collateral-backed cash flows, power and energy infrastructure, and investments tied to the security theme. It remains cautious on long-duration government bonds, highly leveraged deals struck during the low-rate era and assets dependent on a return to abundant liquidity.
