'It’s not like China': Aswath Damodaran explains India’s growth story with a warning

India may be one of the world’s most compelling growth stories—but investors expecting a smooth ride should think again.

Valuation guru Aswath Damodaran says the promise of growth is real, but the unpredictability of democracy, policy shifts, and market overvaluation make India a market that rewards patience, not blind optimism.

In a podcast with ET BFSI, Damodaran said India’s long-term growth is driven by fundamentals: a massive, increasingly affluent population generating real demand across sectors.

“More refrigerators, more cars, more two-wheelers—that creates growth,” he noted.

But with that opportunity comes volatility. Damodaran warned that investors must accept economic corrections as part of the cycle. “Recessions are just the economy’s way of saying you overreached,” he said.

The bigger challenge, in his view, is political continuity. Unlike China, where long-term policy consistency is possible, India’s democracy comes with inherent instability. “Another government comes in—they can change the rules on you,” Damodaran said. “Businesses don’t like it, but it’s part and parcel of the process.”

Earlier this year, he called India “the most overvalued market in the world,” citing its earnings multiples—even after adjusting for growth potential. “Even if you factor in growth, the price you’re paying for Indian stocks is far higher than it should be,” he said. With global uncertainty rising, and the Indian market holding steady, Damodaran believes risk has only increased since.

Yet, there’s a structural advantage India holds in a de-globalizing world: its domestic scale. “As countries turn inward, India’s massive domestic market puts it in a better position than smaller export-driven nations like Vietnam,” he explained.

Damodaran’s take is clear: India’s story has “legs,” but investors must be ready for setbacks, shifting rules, and the unpredictable nature of growth in a democracy.