Here is a brief article from an India-based investment house about the country's financial and economic prospects, and why wealth managers should pay attention to it.

The following commentary comes from Archana Jahagirdar, who is the founder of New Delhi-based Rukam Capital – a firm founded in 2019. Jahagirdar is something of an evangelist for venture capital, arguing that it fills a gap in early-stage funding in the country’s startup ecosystem.

As articles such as this and this show, the rise of India’s economy, associated with an expanding and affluent middle class, is an important development for the wealth management sector. The disruption to global supply chains by the pandemic and geopolitical strife in recent years affected China, and put India under the spotlight, to the benefit of the latter country. Last year, the MSCI India Index of returns (adding capital growth to reinvested dividends) came in at 11.22 in dollar terms, ahead of the MSCI Emerging Markets Index result, at 7.5 per cent. 

After years of robust returns, fuelled to some extent also by the economic reforms of the Narendra Modi administration, there will always be a need to alert for bumps in the road.

We are grateful to Archana Jahagirdar for sharing these views; and we hope it stimulates conversations, which is what these guest articles are designed for. As always, if you want to comment or pass on information, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com.

International investors have long thought of India as a sleeping giant, but there are now many signs that the giant is awakening. One of the strongest signs of this is our flourishing IPO market.

There was a remarkable surge in Indian IPOs last year with some 300 companies going public, up over 20 per cent on the previous year, and with fundraising volumes up 140 per cent.

This is set to continue in 2025 with analysts predicting that the pipeline for this year could exceed $20 billion.

This trend is attractive not only for investors in India’s equity markets, but also for those investing into startups via venture capital. And, of course, all of this is being driven by India’s incredible economic growth. We were the fastest growing major economy in the world in 2024 and are predicted to grow at 6.5 per cent in 2025.

And now, as we usher in the New Year, there is considerable excitement in India that we are set to pass Japan in 2025 to become the second-largest economy in Asia behind China, and the fourth-largest economy in the world behind the US, China and Germany.

China itself only surpassed Japan in 2010, so the fact that we have reached this point already shows just how fast India is growing. 

Readers may well be considering how to access Indian growth and what part it can play in their portfolios.

It is worth noting that Indian growth is being powered by compelling long-term trends. India’s working age population to population ratio will be the highest of any of the largest economies by the end of this decade, and consumer spending is set to double in size in the same period. Even better, India’s growth is digitally led. There are now nearly a billion mobile phone users in India, more than two-thirds of the total population. 

These trends have meant that India now has the third largest startup ecosystem in the world, and that is fuelled by venture capital investment. So, it is VC investment that ultimately helps to drive Indian growth, which means that VC investment is a compelling way to participate in the growth story.

One really good way to do that is via the consumer sector, where there is an early-stage funding gap. It is highly valuable for those consumer startups if venture capital investors can provide capital, strategic support and mentorship to foster innovation and scalability. There is an opportunity to focus on startups that resonate with India's burgeoning middle class, tapping into their rising disposable incomes and evolving lifestyle preferences. Venture capital investors can target startups with the potential to become brand builders, prioritising scalability and technology.

India is also poised to become a global leader in the tech industry, with venture capital investors driving Indian tech growth. High-innovation sectors such as BioTech, HealthTech, and DeepTech are at the forefront, Indian firms are future world beaters in these spaces.

However, making venture capital in India work is not necessarily as straightforward as it might be in developed markets where the industry has decades of history. Navigating the Indian context successfully requires understanding India’s economy, its key sectors and companies, its capital markets, its legal system and its cultural differences. India’s path may have future twists and turns, but the speed and scale of its journey is very compelling.