India’s Increasing Prominence in Global Indices Emphasized by the Economic Survey

The Economic Survey 2021-22 has mentioned that the increase in foreign portfolio investor (FPI) limit to the sectoral cap has acted as a catalyst in the increased weightage of domestic securities in major global equity indices.

The Center had relaxed the FPI limit for Indian companies to the applicable foreign direct investment (FDI) sectoral limit w.e.f. April 1, 2020. The change has caused an increase in India’s so-called foreign ownership limits (FOL) in global indices.

The Economic Survey pointed out the increase in India’s weightage in the MSCI EM Index, rising from 8.3 percent in 2020 to 12.45 percent in December 2021. The nation’s weightage also rose in other indices like the MSCI Asia Pacific Ex-Japan, MSCI World Index, and those compiled by the FTSE.

“Many global institutional investors use MSCI’s EM Index and several such indices covering other markets and themes as part of their passive investment strategy allocating capital in line with the benchmark indices. India’s weight in the MSCI EM index plays an important role in attracting FPI investments in its equity market,” said the survey.

The Survey further added that the rising foreign interest in India’s capital market is seen in the robust FPI flows of Rs. 2.74 trillion during 2020-21.

The survey also asserted the accelerating retail participation in the domestic market.

“The substantial increase in share of individual investors in 2020-21 and 2021-22 can partly be ascribed to the increase in new investor registrations witnessed since February 2020. In April-November 2021, nearly 22.1 million individual demat accounts were added,” it added.

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