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The key drivers that are enabling the growth in the current cycle are consumption…infrastructure investments and the tech stack…”

Vice President, Murali Yerram, highlights how these drivers are helping innovation and entrepreneurship and why investors should consider India – a gateway to growth.

What is driving India’s growth?

The IMF has predicted that India is poised to overhaul the old economies of both Japan and Germany by 2027 to become the world’s third largest economy1. What is driving this growth?

Deep, domestic capital market

  • Domestic revenues make up majority of corporate revenues. This makes the Indian market less susceptible to geopolitical risks
  • Rising domestic retail investor participation in the equity market provides a buffer against foreign outflows

Country and industry upgrades

  • A proactive government that invests for the future of the country; industry capex, public spending and massive infrastructure projects will be growth drivers
  • Global supply chain diversification benefits India
  • Changes in energy mix will reduce the burden of imported inflation

Digital transformation

  • India’s economy is in the midst of digital transformation and it has a much longer runway compared to China and US
  • Emerging opportunities in digital industries like e-commerce, electric vehicles and renewable energy

Consumerism and premiumisation

  • Favourable demographics, rising income levels, local consumption patterns and under-penetration of goods and services

Did you know?

According to the IMF, India’s growth outpaced China in 2023, and is set to repeat that in 2024 and 20251

Four reasons to invest in India

1. Growth in India’s workforce and private consumption

 

62%

of GDP is from private consumption2

35%

Estimated growth of working age population (to 1.3 billion) by 20503

USD 8.8 trillion

Projected middle-class consumption in 2030 (up from USD 32 billion in 1965)4

2. India is forecast to be the fastest growing economy in the world

3. Reforms

Reform initiatives such as corporate tax reduction, the production-linked incentive (PLI) scheme (Prime Minister Narendra Modi’s main industrial policy to boost manufacturing) and the infrastructure push are improving corporate efficiency. In addition, the country has stated ambitious renewable energy targets.

Did you know?

There will be over USD 35 billion worth of grants and capex from PLI and semiconductor investment proposals.6

At COP26 in Glasgow in November 2021, Indian Prime Minister Modi announced that his country wants to become climate-neutral by 2070 and generate 50% of its energy from renewable sources by 2030.7

4. India's future growth is expected to be fuelled by a large middle class

RELATED THEMES AND INSIGHTS

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Four themes driving growth

Why Franklin Templeton for India equity investing?

Franklin Templeton is a pioneer in emerging markets equity investing. With a heritage spanning over 30 years, we believe we’re uniquely positioned to offer meaningful insights into emerging markets. We offer market leading active and passive solutions.

Franklin India Fund

  • Actively managed by one of the biggest domestic Indian equity teams – established over 30 years ago.
  • The investment team uses macro and micro factors to select individual securities that it believes are attractively valued in light of their prospects for growth.
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Franklin FTSE India UCITS ETF

  • Our India ETF is a passive, physically replicated ETF. 
  • It seeks to track the performance of the FTSE India 30/18 Capped Index, offering targeted exposure to large- and mid-sized companies in India.
  • The ETF is competitively priced with a Total Expense Ratio of 0.19%* providing cost-efficient exposure to the asset class.
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*The total expense ratio of a fund (TER). The on-going charges are the fees the fund charges to investors to cover the costs of running the Fund. Additional costs, including transaction fees, will also be incurred. These costs are paid out by the Fund, which will impact on the overall return of the Fund. Fund charges will be incurred in multiple currencies, meaning that payments may increase or decrease as a result of currency exchange fluctuations.

Insights

28 FEBRUARY 2025

What is the hype around India?

In recent years, India has emerged as a pivotal player in the landscape of emerging market equities. Martin Currie provides their perspective on the growth opportunities.

13 SEPTEMBER 2024

India: From K- to F-shaped consumption growth

Templeton Emerging Markets Equity offers an analysis of the divergent growth patterns in consumption among different income groups in India, where upper-income households are seeing rapid growth while lower-income families lag behind.

27 JUNE 2024

India general election update

Western Asset: As Narendra Modi is poised for a third term as India's Prime Minister with backing from allies, India's markets rallied on expectations of continued economic reforms and fiscal prudence. The country's bond market now anticipates inflows after getting included in a major global index.

Archived

Footnotes:

1. Source: Economy size as measured in purchasing power parity terms based on IMF’s World Economic Outlook Database, April 2023. There is no assurance that any projection, estimate or forecast will be realised.
2. Factset, Ministry of Statistics & Programme Implementation, as of December 2022.
3. United Nations.
4. Brookings Development, Aid and Governance Indicators. Raw data, Homi Khras, Brookings Institution, 2012.
5. IMF World Economic Outlook, April 2023. www.imf.org/external/datamapper/datasets/WEO, as of 19.06.2023. Estimates as of 2023. Projections are based on IMF staff estimates. Forecast methodology differs from country to country; as such, some countries projection years may start earlier than others. There is no assurance that any projection, estimate or forecast will be realized.
6. Source: Production Linked Incentive (PLI) Schemes in India. (2021, August 10). Invest India; Modified Programmefor Semiconductors and Display Fab Ecosystem | Ministry of Electronics and Information Technology, Government of India. (n.d.).
7. Brookings Institution - Development, Aid, and Governance Indicators (DAGI), FactSet and Ministry of Statistics and Programme Implementation - India, March 2015. Estimates from 2020.
8. Brookings Institution - Development, Aid, and Governance Indicators (DAGI), FactSet and Ministry of Statistics & Programme Implementation - India, March 2015. From 2020 estimated values.

Investments entail risks, the value of investments can go down as well as up and investors should be aware they might not get back the full value invested.