India vs Other Emerging Markets – An Analysis for 2026 & beyond

India, the world’s fourth largest stock market & economy, is also the fastest-growing large economy, including among its peer emerging market economies. Although India’s economic size ($4 trillion nominal GDP) is not comparable to the U.S.' $30 trillion or China’s $19 trillion, India is now at par with most of the DMs, including Germany ($4.7 trillion) and Japan ($4.0 trillion), and comfortably above the UK ($3.6 trillion), France ($3.2 trillion) and other developed markets and emerging markets in the G20 universe. As an EME, India may be compared with Brazil, Russia, South Korea, Mexico, Indonesia, Turkey and Argentina.

India is also the fastest-growing economy in the G20, with +7.6% real GDP growth for 2024. But India ranks in 8th position globally in terms of real GDP growth after accounting for smaller economies like Ireland (+12.3%), Niger (+10.6%), Kyrgyzstan (+9.04%), Rwanda (+8.9%), Taiwan (8.7%), Tajikistan (+8.4%), and Vietnam (+8.0%) in 2024. Due to its huge population, India continues to rank at the lowest in terms of GDP/Per capita at around $2397 vs China’s $13122 and the U.S.’ $66683. In the MSCI EM Index, India is now at fourth position with around 13% weightage; China is at the top (25%), followed by Taiwan (22%) and South Korea (16.5%). Brazil has around 4.5%, while the rest of the EMEs constitute 18.5% weightage.

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India is still enjoying a scarcity premium in the EM universe (ex. China) due to the appeal of 6D (demand, demography, development, deregulation, digitisation, and democracy). India also has a unique combination of political & policy stability - a rare element in most of the EMs and even DMs except China. India has various structural local tailwinds led by robust domestic demand and favourable demography, despite cyclical global tailwinds like U.S./Trump policy tantrums and lingering geopolitical fragmentations. Most of the blue-chip Indian companies have solid double-digit earnings growth (CAGR) led by a good business model, robust corporate governance, impeccable corporate management, a solid balance sheet, pricing power and market share. 

India’s mantra of reform & perform and broader common economic policies among the two main national political parties/coalitions led by the BJP and Congress (INC) are favourable for institutional flows, including FPIs and FDIs. India’s macro & currency stability, along with political & policy stability and the ability to maintain good trading & diplomatic relationships with both the global South and West, compared to many peers, make it one of the favourite destinations for a ‘China+1’ global diversification strategy, be it for supply chain or financial market.

GDP Growth and Global Contribution

India's economy shows resilient momentum. The real GDP growth for FY26 is estimated at around 7.4%, outstripping most comparable major emerging markets and developed markets peers. India’s robust economic growth is being led by solid private consumption (over 60% of FDP) and public/government spending and infra CAPEX. Although private CAPEX is still subdued, targeted monetary & fiscal stimulus, along with structural & process reform, is expected to boost it in the coming years. India is also expected to be a developed economy by 2047 (100-years of Independence) with an expected nominal GDP of around $15-20 trillion. India’s average (CAGR) real GDP growth for the last 20-years is around 6%, against the emerging markets and developed markets averages of 4.4% and 2.2%.

India, at around $4 trillion nominal GDP, constitutes ~3.6% of global GDP ($110 trillion) in 2024, in line with Japan, with the U.S. at the top (25.5%), followed by China (16.5%) and Germany (4.3%). But India ranks 2nd globally in contribution to incremental GDP growth at around 17%, after China’s 27% and the U.S.’s 10%. Together, India, China, and other major Asian countries contribute around 60% to incremental global expansion. Unlike China or Japan, India's economic growth story is driven by domestic consumption, which shields it from periodical/frequent geopolitical fragmentations due to chaotic U.S./Trump trade & other policies.

Equity Market Performance and Index Dynamics

Emerging market equities delivered strong returns in 2025 and into early 2026, with the MSCI Emerging Markets Index posting significant gains, often led by non-India Asia and select Latin American markets. India is now the world’s fourth largest stock market after the U.S., China (including HK) and Japan in terms of market caps. India’s market depth, institutional (DIIs + FIIs), and retail participation are among the best in EMEs. 

But despite all the growth stories, the Indian market has largely underperformed most of the global EM peers, including the MSCI EM index. Some of the reasons may be:

• Elevated valuation
• Subdued corporate earnings growth
• Huge outflows by the FPIs
• Lack of exposure to global themes like AI
• Lingering uncertainty over the U.S.-India BTA (Bilateral Trade Agreement) amid the Trump tariff tantrum
• LCU (Local Currency Unit) ─ INR depreciation
• Higher cost of living, AI disruption & weak labour market, subdued domestic discretionary consumer spending and muted private CAPEX.
• High consumption tax (despite GST 2.0 recalibration) 
• Still high regulations affecting the ease of doing business in India, and also overall economic productivity and efficiency
• India’s oil & gas and other commodity import dependency is on the higher side compared to most other comparable EM peers.
• No commodity, manufacturing or export plays; too much emphasis on the service sector led by banks & financials

EM Peers vary:

• China: Leads in scale, infrastructure, productivity and efficiencies
• Brazil/Mexico: Benefit from commodities and near-shoring
• Other Asia: Tech-driven gains in Taiwan/South Korea.

Although after the recent correction, India’s Valuations have adjusted, making India more attractive relative to prior highs, it still trades at a significant premium to broader EMs. India's edge lies in sustained reforms and an expected consumption rebound, though external risks (tariffs, global slowdowns) persist.

Conclusions

The recent correction led by the Iran war is leading to a valuation reset for Indian blue chips, making them more attractive relative to some EM peers and historical highs. The market is also expecting a rebound in earnings growth to around 15-20% in the next five years from around 10% average CAGR in the last five years. The earnings optimism is being led by robust economic growth, targeted monetary & fiscal stimulus, rationalisation of direct & indirect taxes and a recovery in domestic discretionary consumer spending. India offers superior upside for investors seeking exposure to structural EM growth. Despite some recent setbacks, India ─ from the fragile five in 2014-15 to the fastest five by 2024-25 ─ remains a bright spot among the EMEs and may continue to have a scarcity premium in the EM universe.