Nilesh Shah, the Managing Director of Kotak Mahindra Asset Management, has identified a significant hurdle to India's economic acceleration: the vast amount of household wealth locked in gold and silver. Speaking during a panel discussion, Shah stated that an astonishing 125% of India's Gross Domestic Product (GDP) is held in these "frozen savings," a phenomenon he described as unique globally.
Shah elaborated that if gold imports were excluded, India would actually operate as a current account surplus economy. However, the nation's deep-rooted affinity for gold results in substantial capital flowing out of the country. "If we are a net exporter of capital, how are we going to grow?" Shah questioned, underscoring the challenge this poses for domestic investment and development.
India's Economic Trajectory and Performance
Despite this challenge, Shah affirmed that India is on the correct growth trajectory, having climbed from the 10th largest economy in 2014 to the fifth largest today. He expressed optimism about India's potential to surpass Japan and Germany in the coming years, maintaining this accelerated pace of growth.
Addressing concerns about India's latest GDP figures, which showed a 7.8% growth in the first quarter of 2026-27, Shah defended the performance. He pointed to the robust profitability of Indian companies, which delivered double-digit earnings growth in both March and June 2026 quarters. This strong corporate showing, he noted, occurred despite external pressures like oil price uncertainty, supply chain disruptions, rupee depreciation, and monsoon-related shortages.
Dispelling K-Shaped Recovery Fears
When questioned about a potential K-shaped recovery, where corporate profits surge while lower-income and rural households struggle, Shah suggested the economic picture was more complex. He cited impressive production figures across key sectors as evidence of broad-based growth between FY14 and FY26:
- Cement production increased from 256 million tonnes to 479 million tonnes.
- Steel production rose from 74 million tonnes to 164 million tonnes.
- Aluminum production grew from 1.4 million tonnes to 4 million tonnes.
- Passenger vehicle manufacturing expanded from 25 lakh units to 47 lakh units.
- Commercial vehicle production increased from 6 lakh units to 10 lakh units.
- Tractor production doubled from 6 lakh units to 12 lakh units.
- Mobile phone production surged from 6 crore units to 15 crore units.
- Food grain production saw an increase from 265 million tonnes to 377 million tonnes.
Shah reiterated that India's upward economic trajectory, moving from the 10th to the 5th largest economy, largely occurred after 2014.
The Road to 10% Growth: Needed Reforms
While acknowledging that global uncertainties would inevitably present bumps, Shah stressed the necessity of tougher decisions to achieve a 10% growth rate. He specifically highlighted the need for significant reforms in land, labor, and capital markets. However, he concluded that the current efforts are sufficient to sustain India's growth trajectory within the 5-7% range, with further corrections needed to accelerate it to higher levels.