India to overtake China to have top weight in MSCI EM Index in 5 yrs

India-China in MSCI EM index: In two deces from 2000 to 2019, India’s economy size grew 6x, while its weightage in MSCI increased by 150 bps.

With domestic reforms, macro-financial stability, and a large consumer market (due to growing population) in India and opposite situation in China, it would be surprising if India does not surpass China in MSCI weightage, a recent report by Elara Securities said. 

China’s move from a $1.2 trillion economy to a $5 trillion economy in 2009 saw its weight in MSCI Index rise ~5x from 3.3 per cent in 2000 to 15.3 per cent, report ded furr. 

Overall, through 2000 to pre-Covid period (CY19), i.e., in two deces, China’s average five-year CAGR growth has been 12 per cent, which pushed up its MSCI Index by 9.5x from 3.3 per cent to 31.4 per cent. 

According to report, China’s growth continues to remain under pressure due to high debt, limited capital splurging, an aging population, a rigid political regime, and easing productivity and India continues to remain on a stey growth path.

“India’s nominal per capita GDP to outdo China’s in 2043,” report ded. 

What is MSCI EM Index?

MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets (EM) countries. 

With 1,441 constituents, index covers approximately 85 per cent of free float-justed market capitalization in each country.

term “Emerging Markets” was originally coined in 1981 by a World Bank economist and it helped establish emerging markets as a distinct investment class. 

In 1988, MSCI launched MSCI Emerging Markets Index — one of first investable benchmark index global equity markets in space. Today, we have over $1.3 trillion in assets under management benchmarked to our emerging markets indexes.