India could sustain growth higher than in the past decade, but not in double digits: Prashant Jain

India could sustain growth higher than in the past decade, but not in double digits: Prashant Jain

A higher growth expectation is unlikely to be sustained by double-digits, as per Prashant Jain’s views in the seventh quarterly update released by 3P India Equity Fund 1.

The CEO of 3P Investment Managers believes that even in the presence of several growth boosters supporting higher growth compared to the last decade, “achieving a 9 to 10 percent growth is less likely".

Jain attributes this to the inherent characteristics of the Indian economy. "The diversity of India that we value so much makes this difficult. The strong democratic processes, federal set-up, a strong judiciary and bureaucracy, free media, voice of NGOs and citizen organisations, etc, reduce the chances of big mistakes on one hand and moderate the pace of change on the other."

His perspective aligns with the broader economic landscape where the rapid growth of the past decade may have been partly fueled by a surge in retail participation. “The significant increase in demat accounts, coupled with the enthusiastic reception of IPOs despite demanding valuations, suggests a degree of exuberance in the market. This heightened retail participation, while contributing to market liquidity, may also contribute to increased volatility and potentially impact the sustainability of high growth rates."

Jain believes that a 6 to 8 percent growth rate is “more realistic” and would still represent a significant achievement for the Indian economy. He further emphasises that this growth will likely be driven by a combination of factors, including continued economic reforms, robust domestic demand, and a growing global presence.

Q2FY25 growth was lower than expectations mainly because of reduced government expenditure due to elections, the report reflects. Going ahead, the RBI and the Finance Minister have expressed confidence about better growth in H2. Herein, the RBI has forecast a growth of 6.6 percent for the current fiscal.