India’s economy is set to grow at an impressive 6-8% CAGR over the next decade, and stock markets are expected to reflect this with nominal returns of 12-13%.
But according to financial influencer and founder of Wisdom Hatch, Akshat Shrivastava, this is where most investors falter — confusing nominal gains with real wealth growth. “Taxes, real inflation, and strategic investing will determine your real wealth, yet most people are clueless about these factors and see no real growth in their wealth,” he wrote on X.
While market returns may look attractive, their true impact is eroded by inflation and taxes.
For instance, at an inflation rate of 6%, ₹1 lakh today will be worth just ₹57,299 in purchasing power a decade later. Add potential wealth taxes to the equation, and the challenge of wealth accumulation becomes even steeper.
Shrivastava pointed out that timing investments and strategically rotating capital, such as leveraging sector rotation, are key to achieving real gains. This involves shifting investments across sectors based on economic cycles—a critical strategy often overlooked by retail investors focusing solely on market performance.
India’s economic growth has a strong historical foundation. From 1980 to 2021, the Sensex delivered an average CAGR of 13%, and prominent investor Rakesh Jhunjhunwala had predicted the Nifty would hit 100,000 by 2030, implying similar growth rates. However, nominal market performance alone won’t ensure sustainable wealth growth for most investors.
Inflation remains a persistent obstacle. Though retail inflation eased to 5.48% in November 2024, reports suggest it will stay above 5% throughout the year, driven by factors like food inflation and rural spending. With 40% of India’s consumer price index linked to imported inflation, external factors further compound the challenge.
Global projections align with India’s strong growth trajectory. The World Bank and Deloitte forecast GDP growth of 6.4-7.2% for FY 2024-25, while PwC predicts a 6.6% CAGR over the next decade. These numbers, while promising, underscore the need for investors to look beyond nominal gains and adopt strategies that protect and grow real wealth.
The message is clear: achieving real wealth requires understanding the hidden factors that chip away at returns.