The $2 Trillion Decade for India’s Alternative Investments Market

India’s alternative investment market is stepping into a decade of structural expansion, a transformation rooted in the institutional maturity of the ecosystem. The rise of private equity, venture capital, private credit, real assets, and secondaries signals that alternatives are moving from the margins of India’s financial system to its very center.

According to recent estimates, total assets under management (AUM) across India’s alternative segments could grow from roughly $400 billion in 2024 to $2 trillion by 2034, a 5x jump and a 22% compound annual growth rate (CAGR). In global terms, this would make India one of the top alternative investment destinations of the next decade.

From Niche to Core

In 2014, alternatives represented a small fraction of India’s managed financial assets. By FY24, their share had grown steadily as AIFs became mainstream instruments of capital formation, a trend expected to take the category to a considerable share of total financial assets by 2034. SEBI’s regulatory clarity, along with the rise of wealth management and family offices, has pushed alternatives from niche to core.

Over the past decade, India’s alternatives industry has expanded from a fledgling segment into a central pillar of private capital formation. AIF registrations have surged across all categories, supported by steady inflows from domestic high-net-worth investors, family offices, and institutions. The ecosystem now spans hundreds of active funds, multiple specialised sub-strategies, and an increasingly sophisticated investor base.

Institutional Depth and Domestic Capital

Perhaps the most consequential structural shift underway is the rise of domestic institutional capital. Pension funds, insurers, and endowments are steadily emerging as anchor investors in India’s alternatives ecosystem. The deepening of long-term, rupee-denominated pools of capital marks a turning point for the industry, reducing dependence on foreign limited partners and creating a more resilient funding base.

Over the past decade, initiatives such as the National Pension System (NPS), insurance-sector reforms, and relaxed investment norms for provident and pension funds have expanded the role of domestic institutions in private markets. This maturing domestic capital base, characterised by patient, long-duration investment horizons, is likely to underpin India’s next phase of private-market growth, ensuring that more of the country’s wealth is channelled into its own innovation and infrastructure cycles.

A Global Re-Rating in Motion

India’s position within Asia’s alternative ecosystem is being steadily redefined. The country is emerging as a key pillar of regional private markets, with a deepening exit environment, improving liquidity pathways, and growing global confidence in its regulatory stability.

The country is now a major destination for global alternative managers, who are deepening their exposure through dedicated India strategies. Large global investors such as Apollo, Blackstone, Brookfield, and KKR have increased allocations and built on-ground teams to tap India’s maturing private-market ecosystem.

This shift marks India’s movement from the periphery of global private capital flows to the mainstream, as both foreign and domestic investors converge on the same growth story: a maturing, well-regulated market with rising institutional depth.

Broad-Based Growth Across Segments

The expansion toward USD 2 trillion in alternative assets will be broad-based, driven by multiple engines of growth. Private equity and venture capital continue to anchor the market, propelled by innovation-led sectors such as technology, healthcare, climate, and consumer platforms that are defining India’s new economy.

Private credit is emerging as the fastest-growing segment, filling the mid-market financing gap left by banks and NBFCs as they pivot toward retail lending. This shift is drawing institutional and long-duration investors seeking steady, rupee-denominated returns.

Meanwhile, real assets and infrastructure, spanning REITs, InvITs, and energy-transition platforms, are gaining depth as policy reforms, production-linked incentives, and the energy transition attract both domestic institutions and global investors.

Collectively, these developments point to a more mature phase in India’s private-market evolution, one where capital is compounding long-term value creation across the economy.

Structural and Policy Enablers

Three macro forces are shaping the next phase of India’s alternatives expansion.

First, India’s banking system is undergoing a steady rebalancing. As banks and NBFCs continue to prioritise retail lending and manage balance-sheet risk, mid-market and structured corporate financing gaps have widened. This realignment has created a natural opening for private credit funds to step in as long-term lenders, offering bespoke solutions and diversification beyond traditional credit channels.

Second, the policy and regulatory architecture has evolved meaningfully. Reforms to REITs, InvITs, and AIF frameworks, along with a sharper focus on transparency and disclosure, have strengthened investor confidence. Real assets and infrastructure are now supported by stable frameworks for listing, taxation, and cross-border participation, creating a foundation for institutional capital to flow into India’s physical economy.

Third, the rise of regulatory technology has streamlined fund formation and participation. Digital KYC, online AIF registration, and standardised reporting have made private-market vehicles more transparent and accessible to both domestic institutions and high-net-worth investors. These changes, together, have transformed India’s alternatives ecosystem from opaque and fragmented into one that is increasingly transparent, data-driven, and globally investable.

India’s Global Positioning by 2034

India’s rise in the global alternatives landscape marks one of the most significant shifts in modern capital markets. Over the next decade, the country’s share of global alternatives AUM is projected to grow meaningfully, positioning India among the world’s largest private-market ecosystems alongside the United States and China.

Within the domestic financial system, alternatives are steadily evolving from a specialist allocation to a mainstream asset class. As portfolios diversify beyond traditional equity and debt, AIFs, private credit, and infrastructure vehicles are emerging as a significant channel of managed capital after mutual funds. This transition reflects a more mature and balanced capital market, one capable of blending public and private flows to fund enterprise, infrastructure, and innovation at scale.

Beyond scale, this growth carries symbolic weight. It underscores the coming of age of India’s financial architecture, where private capital, institutional participation, and long-duration domestic savings converge to power the country’s development agenda.

The Long View

The $2 trillion milestone projected for India’s alternatives market is the outcome of structural and observable forces already in motion. Domestic institutionalization, global portfolio reallocation, and a maturing ecosystem of funds and managers are jointly reshaping how capital is raised, deployed, and recycled in India.

As private markets deepen and democratize, they are set to define the next phase of India’s financial evolution, one that shifts from “alternative adoption” to “alternative leadership.” The coming decade will test the system’s ability to channel this capital transparently and productively, but the direction of travel is unmistakable.

Global investors are recalibrating toward India as a core geography for long-term capital deployment. The country’s expanding private-market engine, underpinned by domestic capital pools, policy support, and growing investor trust is positioning India as a new center of gravity in the world’s alternatives universe.

Chief Brand & Investor Relations Officer

Sneha Dadrwal

Frequently Asked Questions

Q: What is driving India’s alternative investment growth?

A: A maturing financial ecosystem, SEBI-led reforms, and diversified capital sources are propelling private equity, venture capital, credit, and real assets from the periphery to the core of India’s capital markets.

Q: How large could the market become by 2034?

A: Per Avendus Capital’s India Goes Alternatives report (Dec 2024), total AUM could rise from USD 400 billion in 2024 to USD 2 trillion by 2034, a fivefold increase at a 22% CAGR.

Q: What role do domestic institutions play?

A: Pension funds, insurers, and sovereign-style vehicles are emerging as anchor investors, supplying long-duration, rupee-denominated capital that reduces reliance on foreign LPs.

Q: Which segments are leading growth?

A: Private equity and venture capital remain the largest segments, while private credit is expanding fastest and real assets gain depth through REITs, InvITs, and energy-transition platforms.

Q: What policies are enabling this shift?

A: Reforms to REITs, InvITs, and AIFs, digital KYC, and standardised reporting have enhanced transparency and accessibility, drawing institutional and global investors.

Q: How is India positioned globally?

A: India is emerging as a major hub for alternative investments, with global managers like Apollo, Blackstone, and Brookfield expanding dedicated India strategies.

Q: Why does this matter for India’s economy?

A: Alternatives are funding innovation, infrastructure, and enterprise creation, turning private markets into a core engine of India’s long-term growth.

Sources

1. Avendus Capital, “India Goes Alternatives – The Alpha Investment for Maximizing Alpha,” December 2024.