Sentiment muted, but India story is unchanged: McKinsey's Kumra

Mumbai: India's investment appeal is facing a near-term test as the global AI boom draws capital to chipmakers and computing infrastructure in the US and South Korea, while concerns over energy security, oil prices, AI-led disruption to the IT services industry and a 4-5% depreciation in the rupee weigh on sentiment, said Gautam Kumra, chairman of McKinsey's Asia offices. Private capital investors, however, remain bullish on India, finding opportunities that are hard to come by elsewhere, Kumra told ET in an interview.

He said the current caution reflected shifting global capital flows and near-term concerns rather than any fundamental weakening of India's draw for global investors.

"I hear very different things from different investors. Some private capital investors remain extremely excited about India and see opportunities here that they do not find elsewhere. So, while sentiment is muted in the short term, I don't think the fundamental story has changed," Kumra said.


Though India's growth forecast for 2026-27 has been raised to 7.1% from 6.7% projected in August, "sustaining that momentum will require faster reforms and a stronger foothold in emerging industries such as robotics, medical technology, artificial intelligence, electric vehicles and space," said Kumra.

Since Covid, India has attracted global capability centres, semiconductor investments and some manufacturing as companies diversify their supply chains, but it has captured a small portion of the China-plus-one shift with Southeast Asian economies attracting a larger share of manufacturing relocation. "These economies have an edge because of deeper regional integration and their ability to link Chinese manufacturing networks with western markets," he said.

The consultant, who advises some of Asia's biggest companies, said India's ability to attract a greater share of global investment would depend on addressing structural cost disadvantages and giving investors greater confidence in the policy environment. "Ultimately, this is a question of competitiveness. Capital will move when investors have long-term policy predictability and confidence that they can establish and run businesses without surprises," he said.

The McKinsey Asia chief said China's advances in AI, electric vehicles, robotics and other industries offered lessons for India, which must build on its own strengths while balancing investment-led growth with domestic consumption and industrial capacity.

"India continues to grow at 7-8%, supported by favourable demographics and a rapidly digitising economy. The challenge is to turn these advantages into sustained growth and greater global competitiveness," he said.

On whether India could build its own AI ecosystem despite trailing the US and China, Kumra said the opportunity lay in developing affordable solutions for India and the Global South, creating new businesses and jobs, and enabling global firms to adopt the technology.

India's digital revolution and IT services industry provide a strong foundation, but capitalising on the AI opportunity will require a fundamental transformation of the services model and continued government support through policy, regulation and financing, he said.

"India can play an outsized role by reimagining services, developing affordable solutions for the Global South and building new AI-driven businesses. We should also leverage our entrepreneurial ecosystem," Kumra said.

As geopolitical pressures reshape global trade and supply chains, India needs to identify critical capabilities it must develop at home and areas where it can rely on partners, rather than pursue self-sufficiency across the board, he said.