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What is driving India’s growth?

India overtook Japan in 2025 to become the world’s fourth-largest economy, and the IMF expects it to surpass Germany by 20281. What’s behind this momentum?

Deep, domestic capital market

  • Domestic revenues dominate corporate earnings, making India less vulnerable to geopolitical risks.
  • Rising domestic retail investor participation provides resilience against foreign capital outflows.

Country and industry upgrades

  • A proactive government is investing heavily in industry capex, public spending and infrastructure.
  • India benefits from global supply chain diversification.
  • Changes in the energy mix are helping reduce the burden of imported inflation.

Digital transformation

  • India’s digital economy is expanding rapidly, with a longer runway than China or the US.
  • Growth opportunities span e-commerce, electric vehicles and renewable energy.

Consumerism and premiumisation

  • Favourable demographics, rising income levels and evolving consumption patterns are driving demand.
  • Many goods and services remain under-penetrated, leaving room for growth.

Did you know?

India’s growth outpaced China in 2024 and is expected to do so again in 2025 and 2026.2

Four reasons to invest in India

1. A growing workforce and rising consumption

 

64.8%

of GDP comes from private consumption3

68.9%

of the population will be of working age by 20304

75%

of expenditure growth will come from the middle class by 20405

2. The world’s fastest growing major economy

3. Structural reforms

Reform initiatives – including corporate tax cuts, the production-linked incentive (PLI) scheme and infrastructure investment – are boosting corporate efficiency. India has also set ambitious renewable energy targets.

Did you know?

India’s share of global gross domestic product (GDP) rose to 8.25% in 2024.⁷

4. A large and rising middle class

By 2040, India’s middle class is expected to grow by nearly 600 million people, driving 75% of expenditure growth⁸. This will create one of the world’s largest and most dynamic consumer markets.

Why Franklin Templeton for India equity investing?

Franklin Templeton has over 30 years of experience in emerging markets equity investing. We offer both active and passive solutions designed to help investors tap into India’s growth story.

Franklin India Fund

  • Actively managed by one of the biggest domestic Indian equity teams, established over 30 years ago.
  • The team combines macro and micro analysis to identify attractively valued securities with strong growth potential.
Discover more

Insights

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

24 JUNE 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
  1. India’s Economic Juggernaut On Way To Becoming The 3rd Largest Economy, Forbes, July 2025.
  2. IMF World Economic Outlook Database, April 2025. There is no assurance that any projection, estimate or forecast will be realised.
  3. India Private Consumption: % of GDP | Economic Indicators | CEIC, December 2024.
  4. India@100: reaping the demographic dividend | EY - India, 2023.
  5. India’s Economic Juggernaut On Way To Becoming The 3rd Largest Economy, Forbes, July 2025.
  6. IMF World Economic Outlook, April 2025. There is no assurance that any projection, estimate or forecast will be realized.
  7. India - Share of global gross domestic product (GDP) 2030| Statista, 2025
  8. India’s Economic Juggernaut On Way To Becoming The 3rd Largest Economy, Forbes, July 2025.

Important Legal Information

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. There is no guarantee that the funds will achieve its objective over this or any other time period. Capital invested is at risk and you may get back less than you paid in.