Blitz Bureau
NEW DELHI: India’s mutual fund industry crossing Rs 75 lakh crore mark signals a society steadily turning from the comfort of tangible, ‘safe’ assets to the more abstract but potentially more rewarding world of financial markets.
In doing so, India is catching up with trends that have long defined household savings patterns in developed economies; yet, the comparison also highlights just how much distance remains to be covered.
In the United States, mutual funds and retirement-linked products dominate household wealth planning. More than 50 per cent American households own mutual funds, according to the Investment Company Institute.
The US mutual fund industry’s assets are a staggering $30 trillion (Rs 2,631 lakh crore), many multiples of India’s despite a smaller population. Europe, too, has deep penetration of mutual and pension funds, supported by robust regulatory frameworks and strong retirement incentives. Even in smaller developed markets such as Canada and Australia, mutual funds and superannuation schemes account for the bulk of long-term household wealth.
By contrast, India is still in the early stages of this journey. While the Rs 75 lakh crore milestone is impressive, mutual funds account for only about 15 per cent of household financial savings, compared to over 60 per cent in developed markets. This gap reflects both the youth of India’s fund industry and the cultural preference for gold, real estate, and deposits.
One of the clearest indicators of convergence is the rise of systematic investment plans (SIPs). Much like the payroll-linked retirement deductions in the US or auto-enrolment in UK pension schemes, SIPs are instilling discipline and long-term vision among Indian savers.
The sheer scale — Rs. 23,000 crore in monthly inflows — suggests that Indian households are beginning to think of markets not as speculative gambles but as steady wealth builders.
Another striking parallel is the rapid adoption of passive investing. In the US, index funds pioneered by Vanguard have become the cornerstone of retirement wealth, with passive funds now holding more assets than actively managed ones. India is not yet at that point, but the 17-fold growth in passive folios in just five years points to a similar trajectory. The appeal is universal: low cost, simplicity, and the promise of riding the economy’s broad growth curve.
Where India differs is in the interplay of technology and demography. Developed markets embraced mutual funds in an era of paper statements and broker-led advice. India’s journey is leapfrogging straight into the digital age. Apps, UPI-linked payments, and frictionless KYC have turned investing into an everyday act, not an elite exercise.
Yet, challenges remain. Unlike in the US or Europe, India still lacks universal retirement-linked vehicles that automatically channel household savings into markets. Pension coverage is abysmally low, and financial literacy gaps persist.
The risk is that while enthusiasm is high, mis-selling or volatility could shake confidence among first-time investors. Regulation and investor education will thus be critical in ensuring this momentum translates into durable wealth creation.