“Are Indians getting richer or poorer?”

Is India getting richer or struggling under its growth story? Hikma Hatch founder Akshat Shrivastava, in a post on X, unpacked the mixed signals from India’s economy.

On the one hand, India is poised to become the world’s fourth largest economy by GDP, overtaking Japan this year.

On the other hand, nearly 800 million citizens depend on free rations, household savings are at historic lows, and the rupee has fallen to its weakest levels.

India’s GDP growth, a leading indicator of economic health, is showing worrying trends, he writes.

“Since 2019, our average overall GDP growth rate has been around 6%, which relates to a growing India-wide economy,” Shrivastava explains. By comparison, China grew at double-digit rates during its peak growth phase.

Private spending, which makes up 60% of India’s GDP, is slowing. Over the past five years, its growth has averaged just 4.8%. “High taxes and declining household savings are major contributors to this slowdown,” he notes. India’s savings-to-GDP ratio is at a 50-year low, leaving less disposable income to dampen economic growth.

Foreign investors are also sending mixed signals. While foreign direct investment (FDI) inflows increased by 26% in the first half of FY24-25, net FDI—a more accurate indicator after accounting for outflows—fell to a 12-year low. “This suggests that foreign investors are not betting on India’s long-term prospects,” warns Shrivastava.

A weaker rupee should, in theory, attract foreign direct investment, as investors can buy more foreign currency. However, even as the INR has declined from 54 to 86 against the dollar over the past decade, participation in FDI and Foreign Institutional Investor (FII) has declined. Shrivastava highlights, “Domestic consumption alone cannot drive explosive growth. Real growth requires foreign investment or export of goods and services.”

To reverse these trends, Shrivastava suggests tax cuts and better fiscal policies. “Tax rationalization is necessary to expand the base beyond the current 2% level. This would drive markets, boost consumption, and encourage growth.”

His advice to investors? Diversify globally, invest in high-growth sectors such as artificial intelligence and semiconductors, and prepare for a high inflation environment. “Your fortune is in your hands.”