Foreign investors are likely to regain interest in Indian markets only after the current artificial intelligence-driven investment boom fades, Ruchir Sharma, Chairman at Rockefeller International, said in an interview with Bloomberg.
Sharma said India is currently viewed by global investors as being on the “wrong side” of the AI trade, largely because the present phase of AI development is focused on heavy infrastructure spending, including semiconductors, computing power and research, areas where India has underinvested.
India spends about 0.6 per cent of its gross domestic product on research and development, Sharma said, compared with roughly 4-5 per cent in economies such as South Korea and Taiwan. The United States and China, he added, spend close to 3 per cent, despite being much larger economies.
“This has become India’s fault line,” Sharma said, noting that markets currently reward countries that dominate AI infrastructure rather than those positioned to adopt the technology later.
He said India could benefit in a subsequent phase of AI development, when adoption becomes more important and productivity gains come to the fore. But for now, investor concerns remain elevated.
Apart from the lack of AI infrastructure, Sharma said India is also perceived as vulnerable to job disruption from AI, particularly in software services and global capability centres, sectors that together employ an estimated 10-15 million people.
“Some of these are well-paying jobs, and employment has been a structural issue in India,” he said, adding that the risk of AI-driven displacement has weighed on sentiment toward Indian assets.
Sharma said valuations would eventually become attractive again, especially as India’s nominal GDP continues to grow at around 10 per cent annually, potentially setting the stage for renewed foreign inflows once global AI enthusiasm cools. |
