--- title: Will India Steal China’s Thunder Within Emerging Markets? description: Will India soon be a major contributor to global growth? Commonwealth's Peter Roberto, senior investment research analyst, has his eye on emerging markets. image: https://blog.commonwealth.com/hubfs/Rebrand-Blog-Images/IMO-images/Intl-Markets/intl-markets-a.jpg --- [![The Independent Market Observer](https://blog.commonwealth.com/hubfs/IMO-Title-1.png "The Independent Market Observer")](https://blog.commonwealth.com/independent-market-observer) [![Commonwealth Financial Network](https://blog.commonwealth.com/hubfs/lockup_citron-1.png "Commonwealth Financial Network")](https://www.commonwealth.com/) - [Home](https://blog.commonwealth.com/independent-market-observer) - [About](https://learn.commonwealth.com/about/) ### ![print this page](https://blog.commonwealth.com/hs-fs/file-1376458285-gif/images/print.gif)Print # [Will India Steal China’s Thunder Within Emerging Markets?](https://blog.commonwealth.com/independent-market-observer/will-india-steal-chinas-thunder-within-emerging-markets) Posted by [Peter Roberto](https://blog.commonwealth.com/independent-market-observer/author/peter-roberto) This entry was posted on Jan 18, 2024, 12:44:28 PM and tagged [Commentary](https://blog.commonwealth.com/independent-market-observer/topic/commentary) [Leave a comment](https://blog.commonwealth.com/independent-market-observer/will-india-steal-chinas-thunder-within-emerging-markets#comments-listing) ![emerging markets](https://blog.commonwealth.com/hs-fs/hubfs/Rebrand-Blog-Images/IMO-images/Intl-Markets/intl-markets-a.jpg?width=300&height=201&name=intl-markets-a.jpg)Emerging markets may not always be top of mind when building portfolios, but their importance to global growth should not be ignored. In the International Monetary Fund (IMF) October Global Forecast, the IMF noted that advanced economies’ contribution has slowed from a peak of 38 percent of global economic growth in 2006 to an expected 15 percent in 2023. Over the same time frame, emerging and middle-income economies have risen from 58 percent of global growth to an expected 78 percent of global growth in 2023.  Here, we’ll examine China’s path to becoming a major contributor to global growth over the past two decades and make the case that India has the potential to follow suit.  ##### The Secret to China’s Success There have been two major catalysts driving China’s economic acceleration: reforms passed by Deng Xiaoping and China’s accession to the World Trade Organization in 2001. The set of reforms permitted privatization and the opening of foreign investment within the country. The entrance to the World Trade Organization allowed China to leverage its strengths to rapidly scale its industrialization, global exports, and investments into the country. Both of these factors have helped China achieve high-single-digit [GDP growth](https://www.worldbank.org/en/country/china/overview#:~:text=Since%20China%20began%20to%20open,lifted%20themselves%20out%20of%20poverty) since 1978. Many of you may have seen evidence of that growth firsthand, as the favorite gadget from your youth was likely not produced in China but, today, the phone you may be reading this on likely is.  Further, despite Deng Xiaoping’s implementation of a one-child policy, the country has seen its population grow from 1 billion in 1982 to just under 1.41 billion in 2023. [GDP product per capita](https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2022&locations=CN&start=1982) (i.e., the size of the economic output per person) grew by more than 45 times over the same time frame.  ##### The Price of Growth But China’s economic growth has come with a cost. The country’s total [debt-to-GDP ratio](https://www.bloomberg.com/news/articles/2024-01-17/china-s-debt-to-gdp-ratio-rises-to-fresh-record-of-286-1) has risen from roughly 150 percent in 2008 to more than 286 percent today. Additionally, as debt and concerns over housing have picked up in recent years, consumer confidence has remained under pressure. And as confidence in the economy has faded, so has population growth. The country’s [population declined by 2 million people](https://www.cnn.com/2024/01/17/economy/china-population-gdp-decline-2023/index.html#:~:text=China's%20population%20keeps%20shrinking,two%20million%20to%201.41%20billion.) in 2023.  Following COVID-19 and rising geopolitical tensions between the U.S. and China, U.S. and Western companies have looked to move production away from China and into areas such as Vietnam and Mexico. In addition, as China’s middle class and incomes have grown, it has become harder for the manufacturing segment of its economy to carry the burden. To maintain its growth trajectory, the country now must look to pivot to a more service-based economy.  ##### India Has Entered the Chat As China has struggled, India’s star seems to be on the rise. It passed China’s population in 2023 and, per the IMF, is expected to grow by 6.04 percent over the next five years (outpacing China’s growth by 2.61 percent). India’s economic reforms lagged those of Deng Xiaoping’s by 13 years, as the country did not make moves toward reform until a balance of payments crisis in 1991. These reforms led the way to an approach closer to that of a free market, allowing for greater privatization, limiting tariffs, removing licensing requirements, incentivizing foreign investment, and freeing up liquidity within the banking sector. India is in the midst of implementing another wave of economic reforms similar to those seen in China. Since Prime Minister of India Narendra Modi took office in 2014, we’ve seen a focus on privatization, a “Make in India” manufacturing initiative, and the demonetization of the 500 and 1,000 rupee banknotes in 2016 as the country made a pivot toward its Unified Payments Interface digital payment platform. The platform processed more than $1.7 trillion in payments in 2023 alone. The goal of switching to a digital payment platform was to reduce the cost of using cash and to promote transparency, accountability, and efficiency. One distinct difference between the economies of India and China is the size of their service sectors. In China, industrialization propelled its growth after it joined the World Trade Organization in 2001. In India, the service sector already makes up more than 50 percent of the economy. Not surprisingly given the leadership in global digital currency adoption, India has been a leader in financial services and IT within its service sector. More recently, we have seen India’s growth within the healthcare sector. ##### A Changing World and Portfolios While the near and intermediate terms appear to be in India’s favor, the country represents just 8.7 percent of the global economy on a [purchasing power basis](https://www.imf.org/en/Publications/WEO/Issues/2023/10/10/world-economic-outlook-october-2023). This compares with the U.S. and China, which make up 14.6 percent and 19.8 percent, respectively. India now represents just under 17 percent of the [MSCI Emerging Markets Index](https://www.thehindubusinessline.com/markets/the-rising-weight-of-new-india-in-msci-indices/article64959903.ece), and China represents roughly 26.5 percent (as of the end of December). At its height in 2020, we saw China approach nearly 40 percent of this same index, while India came in just above 8 percent at the same time.  The big picture here is there are changing investment opportunity sets outside the U.S., and these developments will play into where individuals choose to invest in the future. The world is changing—and it may change the way we think about constructing our portfolios.  *The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada.*   - [Tweet](https://twitter.com/share) ### Subscribe via Email ![TMO\_IMO\_615x408\_sidebar](https://blog.commonwealth.com/hs-fs/hubfs/TMO_IMO_615x408_sidebar.png?width=1033&height=686&name=TMO_IMO_615x408_sidebar.png "TMO_IMO_615x408_sidebar") [Episode 20](https://vimeo.com/1201911815/0f4f028be9?share=copy&fl=sv&fe=ci) June 17, 2026 [Episode 19](https://vimeo.com/1191658257/1b43ce84dd?share=copy&fl=sv&fe=ci) May 13, 2026 [Episode 18](https://vimeo.com/1183174918/e227cf7d80?share=copy&fl=sv&fe=ci) April 15, 2026 [Episode 17](https://vimeo.com/1174554734/636f0f7aba?share=copy&fl=sv&fe=ci) March 18, 2026 [Episode 16](https://vimeo.com/1163757312/bc2f802d74?share=copy&fl=sv&fe=ci) February 11, 2026 [More](https://learn.commonwealth.com/monthly-media-placements) [![Insights\_CTA\_IMO\_233x400-1](https://no-cache.hubspot.com/cta/default/295024/interactive-187935228457.png)](https://blog.commonwealth.com/hs/cta/wi/redirect?encryptedPayload=AVxigLLjBn6tFfdWe5MdvlzvibjzEethu4vkxu3awrLu7ycVlEbK3Ope1nawJ0GZ1j1c78PT3bQWBc7UBLMVXhYg7HDFn6fyVH8ZWcxxNpTGcxZfrLID72EuCijIJ8E%2FLWNFJCPMTIf%2BPghTiUPzTzLUChRqJuCybAHRNK04FKQmKPzKpRw0vwz8fduUQ2tYM6KQ%2FI%2FvT7OiZQ67DgQ%3D&webInteractiveContentId=187935228457&portalId=295024) ### Hot Topics Select Category Ask Brad Commentary Economic Risk Factor Updates Economics Lessons Market Thoughts Videos In the News Investing Market Updates On My Bookshelf Politics and the Economy [![New Call-to-action](https://no-cache.hubspot.com/cta/default/295024/5f46d9ce-4d40-495c-a126-d4502b647bbf.png)](https://cta-redirect.hubspot.com/cta/redirect/295024/5f46d9ce-4d40-495c-a126-d4502b647bbf) ### Archives - 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Please contact your financial professional for more information specific to your situation. Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index. The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The Russell 2000 is a market-capitalization weighted index, with dividends reinvested, that consists of the 2,000 smallest companies within the Russell 3000 Index. It is often used to track the performance of U.S. small market capitalization stocks. One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent. The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options. The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation. Member [FINRA](http://www.FINRA.org), [SIPC](http://www.SIPC.org) Please review our [Terms of Use](https://www.commonwealth.com/terms-of-use).  Commonwealth Financial Network®