India: On the Rise?

India's growth initiatives and demographics may help its economy continue to advance; its stocks seem to have priced in high expectations for the world's fifth-largest economy.

The best-performing stock market in the world during the second quarter was India even outpacing Japan's solid performance. Stocks headquartered in India make up 14% of the MSCI Emerging Market Index, the largest share of any country other than China and Taiwan.

India's strong second quarter

India's rising relevance

There are several reasons why India has become increasingly important to the global economy and markets:

  • India's economy is now the world's fifth biggest, recently surpassing the United Kingdom. India's GDP is expected by economists to grow faster than 6% in each of the next three years, compared to the U.S., which is expected to grow less than 2%. The International Monetary Fund forecasts India to be the third-largest economy by the end of the decade, overtaking both Japan and Germany.
  • India's population is set to surpass China's this year according to the United Nations, which has predicted India will end 2023 with 1.429 billion people. China is forecasted to end the year with 1.426 billion. Thirty years of a "one child" policy in China and the high cost of raising children have resulted in the fertility rate falling to 1.2 births per woman in China, while India's rate is 2.0 births per woman.

India becomes most populous country

  • India has the world's largest democracy, with a capitalist economy and the world's most popular leader, Prime Minister Modi. As the world looks to "de-risk" supply chains in Asia, some are looking to India. Demonstrating the desire to work with India on their shared goals, President Biden threw a formal banquet for Modi at the White House and the leaders of Congress invited him to address a joint session in early June.