Investment firm KKR backs India as strategic outlier in global trade shift

India has emerged as private-equity giant KKR’s top pick among emerging markets, with the global investment firm calling attention to the country’s economic resilience, policy tailwinds, and relative immunity to global turbulence.

This endorsement comes as KKR reframes the global macroeconomic backdrop through the lens of intensifying geopolitical rivalries, or what it terms “great power competition”—a departure from decades of benign globalisation that favoured open markets, low inflation, and synchronised growth.

However, India’s relative insulation from geopolitical and trade shocks is making it stand out.

“From a macro perspective, India’s relative insulation from global trade friction remains intact,” the firm wrote in the report, adding that the country’s “predominantly domestic, consumer-driven economy and a services-focused export sector” have helped it sidestep global supply chain turbulence.

The report, titled “Make Your Own Luck,” positions India as a top pick among emerging markets amid what KKR calls a new investment “regime change.”

According to KKR, the world has transitioned from the era of post-Cold War globalisation into a new regime defined by geopolitical friction, industrial realignment, and rising national security priorities. This shift has blurred the lines between economics, politics, and diplomacy.

The firm cites examples such as the US’s “Liberation Day” tariffs on more than 60 countries, Europe’s decision to raise defence spending to 5% of GDP, and heightened tensions in the Middle East—all of which illustrate the breakdown of integrated global trade in favour of regional blocs and strategic self-sufficiency.

“Geopolitics and politics are driving economics,” KKR wrote, noting the growing convergence of capital markets policy with national security concerns.

“In a volatile global environment, India’s stability, ongoing reforms, and resilient consumer base create a differentiated and increasingly scalable opportunity,” the firm wrote.

KKR sees signs that India is coming out of a soft patch that marked much of 2024, with green shoots in rural demand, steady services exports, and “meaningful stimulus” aimed at lower- and middle-income households.

The report singles out the government’s production-linked incentive schemes, eased foreign investment rules, and targeted fiscal support as central to India’s rebound. It also anticipates further tailwinds from the Reserve Bank of India’s rate cuts in the second half of the year.

“India presents a unique combination: strong nominal GDP growth, declining real interest rates, expanding domestic capital markets, and a long-term consumer runway unmatched in many other markets,” the report noted

“As the global trade landscape recalibrates, India is well-positioned to increase its manufacturing share, particularly as oil prices soften and ‘China+1’ strategies become more entrenched,” it added.

Beyond growth, KKR sees India as a diversification tool. The firm noted that the country’s equity markets have become less correlated with global indices—a useful feature in a world roiled by policy shocks, war, and inconsistent monetary cycles.

The report conceded that a “modest depreciation” of the rupee is likely, but deems this manageable and hedgeable. “The core investment thesis remains compelling,” it says.