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What is driving India’s growth?

Now is the time to invest in India's ascendancy, where a confluence of favourable factors—from government-led initiatives like “Make in India” to “Digital India”—is making it a standout destination for investment. Seize the opportunity to grow your portfolio with India's vibrant economy and transformative progress.

Unprecedented Pace of Digitalisation

  • The integration of digital technologies into various industries is enhancing efficiency, expanding consumer bases, and creating new revenue streams.
  • Increased internet penetration, driven by affordable access, is boosting the growth of eCommerce and digital financial services, even in rural areas.
  • The Unified Payments Interface (UPI) system is driving a shift away from cash transactions, increasing consumer spending online and enabling millions of smaller-sized firms to scale up.
  • India’s digital revolution is not a temporary fad but a structural shift, offering sustained growth opportunities for investors.

Rising Affluence: A Force to Reckon With

  • India boasts one of the youngest populations in the world, with a median age significantly lower than that of major developed economies.
  • As India's economy expands, a significant portion of the population is moving into the middle-class bracket, leading to increased disposable incomes. This rise in income levels enhances consumers’ purchasing power, especially on non-essential and luxury goods.
  • With growing affluence, Indian consumers are prioritizing quality, brand value, and premium experiences. Companies catering to these preferences are likely to see sustained growth, making them compelling investment targets.

Emergence as a Manufacturing Powerhouse

  • In the wake of global supply chain reconfigurations, India is emerging as a credible alternative to traditional manufacturing hubs.
  • The government has placed manufacturing at the heart of its growth strategy, aiming to increase the sector's contribution to GDP.
  • New initiatives include the Production Linked Incentive (PLI) for 14 key sectors to enhance India’s manufacturing capabilities and exports.
  • The expansion of the manufacturing sector is expected to create millions of jobs, thereby boosting consumer demand and economic growth.

Infrastructure Investment Fosters Sustainable Growth

  • The government has been ramping up capital expenditure for infrastructure projects that boost connectivity and logistics efficiency across cities.
  • Significant investments in roads, railways, ports, and airports will also bolster India’s trade prospects and economic resilience.
  • The current infrastructure push not only sets a foundation for sustained growth in diverse sectors, but also creates new business opportunities and jobs, sparking a virtuous cycle of growth.

1. India: still one of the world’s fastest-growing economies

In just over a decade, India's meteoric rise from the 11th to the 5th largest global economy is a testament to its resilient growth and ambitious economic reforms. Harness the potential of India's expansive growth trajectory and be part of a story of transformative development across diverse sectors.

1. Source: International Monetary Fund (IMF), World Economic Outlook Database, April 2024. e = estimation. 
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.

2. India’s Share of Global GDP is Steadily climbing

India's contribution to global GDP is steadily climbing, thanks to its robust internal growth, domestic consumption, increasing industrialization, and significant technological advancements2. This sustained raise not only elevates its position but also presents a strategic advantage for investors in Indian equities.

2. Source: International Monetary Fund (IMF), World Economic Outlook Database, April 2024.  e = estimation. 
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.

3. Indian Consumers are Younger and Getting Richer

India's favourable demographics, with a large and youthful population, alongside a burgeoning middle class, create a powerful engine for sustained economic growth and consumer spending.

 

The average age of Indians will remain under the global average by 20303…

 

 

… while the size and purchasing power of its middle class continues to grow3

P = Predicted.
3. Source: United Nations Population Division, as of July 2022. There is no assurance that any projection, estimate or forecast will be realised.

 

4. Indian Equities Continue to Command a Valuation Premium

India has historically traded at a premium to other emerging markets, reflecting its historically higher return on equity (ROE), signifying the robust profitability of domestic companies.

India ROE Premium vs Other Markets4
Jan 2014 - Dec 2023

2 Years Forward Price to Earnings : India vs Other Markets5
As of Jan 2024

MSCI India represented by MSCI India Index; MSCI EM represented by MSCI Emerging Markets Index; MSCI AC Asia Ex JP represented by MSCI All Country Asia Pacific Ex Japan Index; MSCI China represented by MSCI China Index.
4. Source: FactSet. Refinitiv. There can be no assurance estimated figures will be realized.
5. Source: FactSet. There can be no assurance estimated figures will be realized.

 

5. Nifty’s EPS Growth Reflects India’s Economic Vigour

Fueled by a rapidly expanding economy, progressive government policies, and a surge in consumer demand, the earnings per share (EPS) growth of Indian equities is likely to stay on an uptrend despite global headwinds.

 

Nifty’s EPS set to clock double-digit gains in coming quarters6

 

*CAGR = compound annual growth rate.  Nifty refers to the Nifty 50 Index. F = Forecast.
6. Source: Bloomberg. Nifty EPS estimates (in INR). As of 30 April 2024. For illustrative and discussion purposes only. The scenarios presented are an estimate of future performance based on evidence from the past on how the value of this investment varies, and/or current market conditions and are not an exact indicator of how the market will perform.  Past performance does not predict future returns. There is no assurance that any projection, estimate or forecast will be realised.

The Franklin India Fund is uniquely positioned to capitalise on the opportunities inherent in India’s economic ascent.  And our Franklin India Equity platform is one of the best placed in the industry to capitalise on investment opportunity for our clients.

Proven Performance

Award-winning Fund with a track record of more than 18 years7, reflecting our commitment to deliver consistent results.

Click here for more information about the Fund

Large and Stable Investment team

Our 16-member investment team establishes us as one of the global managers with the largest on-the-ground presence8.

Their domestic market specialization also offers a strategic edge in identifying opportunities.

High Conviction Portfolio

Our focus is on acquiring businesses that exhibit predictability, scalability, and unique selling propositions.

We prioritise quality and invest only in companies we thoroughly understand to ensure consistent returns.

Synergistic Global Collaboration

The sharing of insights across Franklin Templeton’s global platform enriches our India team's rigorous bottom-up research, directly benefiting our investors through enhanced decision-making

7. The Fund was incepted on 25 Oct 2005. Source: Franklin Templeton, as of 29 February 2024. Past performance is not an indicator or a guarantee of future performance.
8. Source: Franklin Templeton, as of 31 March 2024.

Did you know? Fun Facts about India9

9. Source: Western Union, “7 facts you probably don’t know about India” published on 19 Jan 2023.

Insights

SEPTEMBER 13, 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.

JUNE 27, 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

JUNE 24, 2024

What’s next for India’s economic ascent?

Despite political uncertainties following India’s recent elections, the country’s vibrant democracy, strategic policy reforms and burgeoning market present a compelling narrative of resilience and potential, according to Franklin Templeton’s Dina Ting. She sheds light on the unique opportunities that lie ahead for India in reinforcing its stature as a global economic contender.

Archived