Return on investment

Predictions of diminishing returns on investments in developed countries could trigger interest in emerging markets such as India


The current unfavourable global economic environment can have long-term implications for some countries in the developed world. As noted in a recent report by McKinsey Global Institute, compared with the last three decades, returns to investors in Western Europe and the US will be much lower in the next 10-20 years.

Over the last 30 years, investors in these countries benefited significantly from strong global growth, higher productivity and favourable demographics, which resulted in higher gains in both equity and debt investments. But this is changing and investors might have to revisit their investing assumptions. Lower returns would mean that people will have to save more or spend less during their retirement which can further affect consumption and growth.

The upshot: investors in the developed world might look to cover the shortfall by investing in emerging markets. This could be an opportunity for a country like India to fund growth with long-term investment.