The Indian mutual fund industry, in the shape that exists now, is twenty years old. There was also a pre-historic era earlier when fund-like savings products were offered by the old Unit Trust of India as well as some public sector banks, but mutual funds as we know them now came into being in 1993 when the industry was thrown open to private players, both domestic and foreign.
During these two decades, the total assets managed by the industry has grown from two per cent of gross domestic product to eight per cent. This looks like decent growth. But there is one more number that one must looks at and that's the growth of equity assets. The reason is that the MF industry is two separate industries: a retail-oriented equity investment management industry and very different, wholesale, corporate deposit service which comprises fixed-income funds. There is some overlap but this is the basic division.
On running the numbers, we find that in 1993, equity assets were 1.2 per cent of GDP while now they are 2.2 per cent. This doesn't look so good, does it? And it isn't. If the original intent was that funds would allow household savings to flow into equity and the returns from well-managed equity investments to flow back to households, then I'm afraid the glass is more than half-empty. Pick a random person who is prosperous enough to save and you'll find awareness and interest in mutual funds to be not a whole lot more than it was two decades back. I know this from first-hand experience.
This hasn't changed because the fund industry has been busy earning its daily bread from easy-to-sell products and the government has focussed more on making funds safe and less on encouraging people to invest. If nothing much changes, then mutual funds will remain a niche product for corporates on one side and mostly HNIs on the other.