India's consistent nominal GDP growth is poised to gradually increase its weight within the MSCI Emerging Markets (EM) Index, according to Daniel Morris, the chief market strategist at BNP Paribas Asset Management. This projection highlights India's growing prominence in the global investment landscape and its potential to attract even more international capital.

Morris pointed out that India's economic expansion is largely fueled by domestic consumption, a thriving services sector, and a burgeoning middle class. This unique combination distinguishes India from other emerging markets like China, which is more reliant on exports. India's internal demand-driven growth makes it a potentially more stable and resilient force in an increasingly volatile global economic environment.

Currently, India holds the second-largest weight in the MSCI Emerging Markets Index. Should India sustain its nominal GDP growth at a low double-digit rate, its representation in the index is expected to rise steadily. This increase in weight is significant because it will likely draw more benchmark funds to invest in the country. The MSCI EM Index is a widely tracked benchmark for emerging market equities, and many global funds allocate capital based on the index's composition. As India's weight increases, these funds will need to increase their investments in Indian stocks to accurately reflect the index, leading to substantial inflows.

In February 2025, India's weight in the MSCI Emerging Markets (EM) Index was set to increase to 19% from 18.8%, following MSCI's quarterly rejig. This led to passive inflows of an estimated $850 million to $1 billion.

Furthermore, recent adjustments to the MSCI Global Standard Index have seen the inclusion of companies like Hyundai Motor India, while others, such as Adani Green Energy, have been removed. These changes trigger shifts in fund allocations, demonstrating the dynamic nature of the index and the importance of India's continued growth to maintain and improve its position.

In May 2024, MSCI added 13 Indian stocks to its Global Standard Index and removed three, bringing the total count of Indian stocks on the MSCI indices to 146 from 136 earlier. At that time, it was estimated that India's share in the MSCI EM Index was set to increase from 18.3% to about 19%, potentially bringing a net inflow of about $2.5 billion in foreign institutional investment.

Daniel Morris also noted that India's Q3FY24 GDP growth significantly exceeded expectations, coming in at 8.4%, primarily due to higher growth in tax collections and lower subsidies. Multiple agencies have since increased India's GDP forecast for FY2024 by 50-100 basis points, estimating it at around 7%. This robust growth, supported by strong domestic demand, reinforces the positive outlook for India's continued rise in the MSCI EM Index.