The growth impulse in India is shifting from basic necessities to aspirational spending, led by middle-to-upper income segments — that's the gist of global wealth manager KKR's 2026 Outlook: High Grading report. The investment firm has observed that both corporate reform and consumption upgrade stories are gaining momentum. 

Without question, Japan is ground zero for corporate reforms, the report said, while India is "currently the best play on consumption upgrades". The report also added that there are green shoots in Korea in terms of corporate reforms, and southeast Asia in terms of consumption upgrades that also warrant investor attention.

The consumption upgrade cycle is what we see as one of the most powerful structural forces shaping the region beyond the reform-driven corporate carve-outs we are witnessing across Asia, most notably in Japan and Korea, it said.

"Nowhere is this more evident than in India, where the growth impulse is increasingly being led by the middle-to-upper income segments rather than the lower tiers."

According to KKR, India's affluent population will expand nearly ten-fold between 2018 and 2028. It said that the trend is already visible in domestic tourism, where higher disposable incomes are translating into a meaningful shift from basic consumption to aspirational spending. "Once the foundational needs of food, shelter, and energy are met, incremental income is disproportionately being directed towards education and healthcare, two sectors where KKR maintains a deep and growing exposure", the report said.

Global services as an investment theme

The importance of services to global growth outlook has never been higher. However, as per the KKR report, there are tremendous divergences and varying degrees of opportunity by region. Services are becoming a battleground for productivity, trade balances, and market leadership. It said that in the US, the services economy has been a consistent driver of resilience, benefiting from deep capital markets, a sophisticated corporate base, and now the early monetisation of AI in areas such as automation, customer engagement, and data analytics.

"India is another standout — not because of manufacturing strength, which remains somewhat constrained by regulation and execution risk, but because of its emergence as a global services exporter," the report mentioned.

"The income and wealth effects for India’s top 200 million consumers are reinforcing this trend, driving demand for education, healthcare, and discretionary services," the report added.

According to KKR, there is a "structural weakness" in Europe, which has a services economy "underdeveloped" relative to its potential. The cross-border financial services in Europe remains fragmented, and there is no coherent framework for scaling service exports the way the US and India have done, it said. The goods trade is increasingly getting politicised there, and capital-intensive manufacturing is harder to onshore at scale, the ability to export high-value services has become a critical offset, the report indicated.

China faces a different challenge

While the communist state has a large services sector in absolute terms, the same is hampered by weak domestic consumption, youth unemployment, and policy uncertainty arising from divergent government priorities. As a result, the report said that China’s services exports have not emerged as a growth engine in the way India’s have.

"The US and India have shown that a dominant services base can underpin strong equity markets and currency stability over time. Europe needs to close the gap, and China will need to address domestic structural issues if it wants services to play the same role," as per the report.

Demand for oil

KKR expects a challenging supply-demand backdrop in 2026, with oil prices averaging around $60 per barrel. "We expect crude prices to recover to $65-70 per barrel by 2027-28, above the futures pricing that has remained anchored near $60 per barrel," the report said. It has also argued that the "conditions of an oversupplied oil market in 2026 is now well established", and said that most of the forecasts are indicating an excess supply of 2-3 million barrels per day in the first half of 2026.

The global investment manager said that China's shift towards electrification, and new energy vehicles (including LNG trucks) will remain a structural drag on demand. However, according to the report, India's demand growth could offer some offset, but slower urbanisation, lower labour force participation, a more service-oriented economy, and earlier EV adoption suggest that the demand growth is unlikely to match the scale of China's past expansion.

Over the next decade, oil demand is expected to rise, supported by Asia and other emerging markets, petrochemicals (demand for naphtha and LPG), and jet fuel (where substitutes remain limited). The report also said that from 2027, the production growth from non-OPEC (organisation of the petroleum exporting countries) including teh US, Brazil, Canada is expected slow down, while Norway, the UK, China and Mexico will face outright declines

Own more Asia

The KKR report has stated that it wants to "own more Asia at this point in the cycle". It pointed out that investors, especially on the private side, are now generally underweight this region, including equities, infrastructure, and credit. The investment manager said that the intra-Asia trade remains one of the true structural investing stories in the region as the economic landscape is reshaped.

"As supply chains decouple from traditional Western dependencies and regional demand ramps up, intra-Asia flows are increasingly becoming localized. 800 million plus millennials in the region coming of age is certainly helping to drive increased demand for goods and services", the report said.

"Back in 1990, only 46% of Asian trade was conducted within the region; by 2024, that percentage had risen to 60%, and we expect it to grow another 8% over the next few years", it added.