India's economic growth prospects remain robust, justifying its high valuation in the eyes of BlackRock Research. Despite concerns about elevated equity valuations, BlackRock suggests that India's equity risk premium is near its historical average, indicating that valuations are supported by strong growth potential. Stable policies and rising domestic demand continue to attract investors to the Indian market. BlackRock favors India among emerging markets, citing compelling opportunities driven by what they call "mega forces".
Several reports and analyses echo this sentiment, projecting India as the fastest-growing major economy in the coming years. Morgan Stanley forecasts India's real GDP growth at 5.9% in 2025 and 6.4% in 2026, outperforming the predicted global economic slowdown. The OECD's 2025 Economic Outlook Report also estimates India's GDP growth to lead G20 nations at 6.3% in 2025 and 6.4% in 2026. While a growth rate of 6.5% is expected for 2025, achieving the 8% or higher annual growth needed to compete with China and become a developed nation by 2047 remains a considerable challenge for India.
BlackRock identifies several "mega forces" reshaping India's economy and driving long-term growth. These include a young and expanding workforce, rapid digitization, the energy transition, and the rewiring of global supply chains. India's working-age population is projected to grow by over 140 million in the next 20 years, providing a demographic dividend that sets it apart from many major economies. The government's focus on building both physical and digital infrastructure, such as highways, logistics corridors, digital IDs, and payment systems, is also driving formalization and expanding access across sectors.
Vivek Paul, Head of Portfolio Research for BlackRock Investment Institute (BII), has indicated a clear strategic overweight on Indian equities, positioning India as a long-term beneficiary amid shifting macroeconomic dynamics. BlackRock sees India as a key long-term play amid global macro uncertainty, with high-conviction bets in fintech, energy, and digital sectors. They believe that India distinguishes itself through credible fiscal management, political continuity and stability, and a demographic edge.
While the MSCI India index trades at a forward earnings multiple slightly above its 10-year average, BlackRock argues that valuations are not as stretched as multiples imply, and that India's long-term growth outlook supports this premium. They prefer the equity risk premium as a valuation gauge, which incorporates growth and interest rate assumptions, estimating India's ERP to be in line with its historical mean.
Other factors contribute to India's attractiveness. Relatively stable policies and rising domestic demand have drawn strong investor interest, even as equity valuations have moved higher. India's scale, expanding digital infrastructure, and demographic profile place the country at the heart of technological adoption. Also, India's neutral geopolitical stance is likely to work to its advantage.
However, challenges remain. Elevated public debt levels could pose a threat to fiscal sustainability. To reach its ambitious goals, India needs to implement comprehensive economic reforms and address structural challenges. The global economic slowdown and geopolitical tensions could also impact India's growth.
Despite these challenges, BlackRock remains optimistic about India's long-term growth potential. The firm encourages investors to consider increasing their exposure to Indian equities, particularly large-cap stocks with strong earnings potential. BlackRock believes that India's economic transformation and development priorities align well with global investment themes, making it an attractive destination for long-term global investors.
