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Nishchay Goel Matthias Knab, Opalesque for New Managers: The Macro Turn: Credit, Consumption, Reforms - and the Currency Question
By Matthias Knab, Opalesque
In the first article of this series, Nishchay Goel, Founder and CIO of Singapore-based Duro Capital, reconstructed how a prudent central bank slowdown and AI-driven benchmark rebalancing produced the largest foreign outflow from Indian equities this century - $30 billion in the first half of 2026 alone. In this second article, Goel and his colleague Parikshit Shah walk through the hard data behind India's recovery, the reforms that are showing up in company P&Ls rather than just in headlines, and the question every dollar investor asks first: the rupee.
Start with the fuel: credit growth is back
"One of the biggest things that drives any economy, not just the Indian economy, is credit growth," says Nishchay Goel. "We are finally seeing credit growth data start to get better and better with each passing month. As credit growth improves, so does the economy - it's the fuel that gets the economy going."
Parikshit Shah puts numbers on the round trip: "India's credit growth before the RBI's self-imposed slowdown used to average anywhere between 15 and 18% - a high-teens number. It came down all the way to 9 to 10% by the middle of last year. The latest print for June, which just came out last week, shows credit growth is back up to the mid-teens level of 16 to 17%. If banks are lending more, there is more consumption happening and more confidence in the economy for banks to be lending into."
Crucially, this recovery is happening against a macro backdrop that requires no artificial stimulus. Goel runs through the dashboard: the last reported real GDP growth was 7.8% - "I think that's the highest for any major economy globally" - headline CPI inflation stands at 4.4%, firmly within the Reserve Bank of India's comfort zone, and the policy rate sits at 5.25%.
"That means we actually have real interest rates that are positive in India," Goel emphasizes. "There is no situation where the real interest rate is negative to prop up the economy. The boost we are seeing comes with macro data that is reflective of a robust economy."
C + I + G + X: every component pointing the same way
Goel breaks the economy down into its textbook GDP components - consumption plus investment plus government spending plus net exports - and finds each of them turning favorable. Even the external balance is benign: India is currently running a current account deficit of just north of 1%, "which is extremely manageable."
On consumption, he offers a piece of arithmetic that explains why India sits at a demographic and income inflection point that few other economies can match:
"India's GDP per capita is around $2,200 to $2,300. Out of that, roughly $1,700 is spent on necessities. It's only the $500 or so that goes to comforts and discretionary spending. Now, when you grow real GDP at 7-8% and add 4% inflation, you're growing nominal GDP at 10 to 12% - that adds around $200 to $250 to GDP per capita each year. Your necessities still remain at $1,700-1,800. It is your discretionary spending that grows by 40 to 50% each year. That is the unique position India is in."
In other words: nearly every incremental dollar of Indian real income growth flows into discretionary categories - autos, durables, travel, quick commerce, financial products - not into subsistence. It is a structural volume tailwind for consumer-facing businesses that compounds year after year.
On investment, Goel mentions: "Everyone knows India has a trillion dollars' worth of investment needs. What is interesting is what industrial firms are actually reporting - some of the highest order books they have ever had. There might be delays in some of these order books getting fulfilled because of geopolitical tensions and uncertainties, but that doesn't take away from the fact that these are some of the largest order books we've seen for the economy."
On government finances, Goel points to what he calls an anomaly: "India is probably the only large economy on the planet where central debt to GDP is going down, not up. The government is actually managing its finances. Before this war started, India was on track to hit its long-term fiscal deficit target in fiscal year 26-27 - that is remarkable for any government to hit a long-term target today."
Reforms that change the P&L, not just the narrative
Investors have learned to be skeptical of reform stories in emerging markets - announced with fanfare, absorbed by bureaucracy, invisible in earnings. So I asked Goel and Shah directly: what do the recent reforms - the GST rationalization, RBI easing, deregulation - actually change at the company P&L level, versus the narrative level?
Two policy moves stand out for their direct transmission into corporate earnings: the raising of income tax slabs, and the cut in GST - the goods and services tax - by 10 to 12% across a wide range of goods.
Goel traces the mechanism step by step: "When you get an income tax exemption, your ability to spend goes up. Now you add GST cuts, which immediately make goods 10 to 12% cheaper - that is a natural booster for volumes. When volumes go up for companies, it leads to operating leverage. When you see operating leverage, margins expand and earnings go up. That is where the cyclical uptick is coming to the fore."
Shah points to passenger car sales as the cleanest, most visible evidence of transmission: "Car sales have been one of the major beneficiaries of the GST cuts. Since the cuts happened, sales have shown average year over year growth of approximately 15% over the last six to nine months - significantly outpacing the -5% year over year growth in the 12 months prior to the GST cuts. That is a clear indication the consumer is feeling confident, and that these tweaks by the government have led to tangible benefits being seen in the economy."
The confirmation also came from the ground up, before it showed in the aggregates. "Companies in our portfolio started talking about the worst being behind them around that October-November period last year," Shah says. "And that is now playing out - whether it's earnings overall, or sectors like auto and real estate, which have visibly picked up in the data."
The rupee: has the damage already been done?
No conversation with a dollar-based allocator gets far without the currency question - and for India, it is a fair one. The rupee has depreciated by around 10.5 to 11% against the US dollar over the last year, making it one of the worst-performing currencies anywhere.
Goel is direct about the three causes. First, the outflows themselves: "Foreign capital sells rupees, buys dollars, and gets out." Second, the war in the Middle East: "India imports 90% of its energy, which means that when oil goes up, the import bill goes up, and India needs to buy more dollars." Third, speculation: "When these kinds of events happen, there are obviously bets being made against the rupee as well."
But he draws a contrarian conclusion from the very severity of the move. "Over the very long term, the Indian currency has depreciated by around 4 to 4.5% on an annual basis. You have now seen roughly 2.5 times that depreciation in the last 12 months alone. On a real effective exchange rate basis, the currency is definitely undervalued. I would imagine for a dollar investor, that is some sort of implied protection - the depreciation has already happened, and you are going in after it, not before it."
He points to two additional supports on the horizon. The first is India's new FCNR deposit scheme, which offers non-resident Indians attractive rates on a hedged basis to bring capital home: "India expects approximately $50 billion to come into the country through these deposits by September 30th, 2026. We believe this will provide a backstop to the currency - and not just a backstop, it could be a positive for the currency going forward."
The second concerns India's second-largest import after energy: gold. "Indians love gold, and the government is making gold harder to import. If those imports start to go down, that will have an impact on the currency."
Goel is careful to frame the argument with humility: "We are not currency experts. What we are essentially saying is that you are sitting at a time right now where the medium-term currency depreciation might have actually already happened. You are coming in at a base that might be more attractive - and at a time when roughly $50 billion of NRI flows will come into the market."
Credit growth back to the mid-teens, reforms flowing into volumes and margins, an earnings cycle that bottomed in December 2025, and a currency that may have front-loaded its pain: the macro case is assembled. In the final article of this series, Goel and Shah open up the portfolio itself - the "we don't like competition" framework, the quick-commerce leader they bought 40% off its highs, the niche lenders compounding book value at 25%, and the Indian companies quietly powering America's data center buildout.
Webinar: "India's Foreign Investor Exodus: A Warning or An Opportunity?" - Nishchay Goel and Parikshit Shah of Duro Capital present their thesis live on Thursday, September 24th at 11am ET (4pm UK, 5pm CET, 6pm Riyadh, 7pm Dubai, 8:30pm Delhi). Register here to reserve your place and submit questions in advance: www.opalesque.com/webinar. A replay will be provided to all registrants.
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This article is for informational purposes only and does not constitute investment advice or an offer to sell securities. Past performance does not guarantee future results. Investors should conduct their own due diligence and consult with qualified advisors before making any investment decisions.
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