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Arvind Chari argues that global investors mislabel India as just another emerging market, and makes the case for why India deserves a dedicated capital allocation of its own.
Arvind Chari is Chief Investment Strategist at Q India UK, an affiliate of Quantum Advisors India. He has over two decades of experience in Indian and global financial markets, with a particular focus on macroeconomics, fixed income and investment strategy. At Quantum Advisors, he has been closely involved in guiding global investors on their India allocation.
Arvind Chari has spent close to five years pushing one central idea: global institutional investors need to stop viewing India through the lens of "emerging markets" or "Asia" allocations, and instead treat it as a dedicated mandate. Most global capital pools, whether pension funds, sovereign wealth funds, or endowments, allocate money in broad regional or thematic buckets. India's flows rise and fall based on decisions made about emerging markets as a whole, even though India's growth story, in Arvind's view, is structurally different from peers like Brazil or Russia where GDP growth does not reliably translate into shareholder returns.
Arvind lays out the numbers behind India's current under-allocation. Global assets under management sit around 300 trillion dollars, of which India's public markets account for less than a trillion dollars and private markets perhaps another trillion, a combined weight far below India's roughly 3.5 percent share of global GDP. He connects this gap to India's own growth arithmetic: sustaining 8 percent real GDP growth requires an investment-to-GDP ratio of 38-40 percent, well above the current 30-34 percent, and domestic savings alone cannot close that gap. Foreign capital, he argues, has to fill the difference, and policy has not yet been framed around that need.
The conversation moves from the scale of the opportunity to the practical reforms that could unlock it, including tax treatment of foreign investors, ease of market access, and the distinction between "financial FDI" and genuine multinational manufacturing investment, drawing a comparison to Vietnam's experience with China-plus-one manufacturing flows.
Chari, Arvind. "India’s Case for a Dedicated Global Investment Mandate." Episode 80 of Big Ideas. XKDR Forum, 7th September 2026. Video, 18:15. https://www.xkdr.org/viewpoints/indias-case-for-a-dedicated-global-investment-mandate-big-ideas-ep-80
Arvind Chari opens with the idea he has been developing for four to five years: global institutional investors should treat India as a dedicated mandate rather than folding it into broader regional categories. Most global capital, he explains, sits with investors based in a specific region, a US pension fund, a Middle East sovereign wealth fund, or a university endowment in the US or Europe. These investors typically allocate the bulk of their capital at home due to regulation or simple home country bias, but the portion they deploy internationally almost always gets organized into buckets: home versus global or international, or developed market versus emerging market.
India's flows into these portfolios depend on decisions made about these buckets rather than about India specifically. If the allocation to emerging markets as a whole rises, India benefits; if it falls, India loses out, regardless of what is actually happening in the Indian economy. Arvind points to the "silliness" of the BRIC grouping (Brazil, Russia, India, China) in the 2000s as an example of how India got bundled with countries whose growth stories work very differently.
The core of his argument rests on a historical pattern: since India opened up to foreign and private sector investment in 1990-91, real GDP growth has averaged about 6.3 percent, with nominal GDP growth in double digits, and this growth has shown up reliably in corporate earnings and, cyclically, in stock market returns. He has traced this relationship back 25-30 years and finds it holds closely for India, in contrast to many other countries.
"It's in very few countries that this link between GDP growth and market return is very visible."
He explains why the same GDP-to-market link fails elsewhere. In Brazil, growth concentrates in resource and commodity sectors that don't necessarily benefit the broader equity market. In Russia, growth gets captured by crony capitalists, leaving nothing for minority shareholders or outside investors. India, by contrast, has rule of law, a democratic process, and a diversified economy and market, which is why the GDP-growth-to-market-return link holds. This is the foundation of his case that India merits a dedicated allocation approach rather than being priced as part of an emerging market basket, an approach he notes has performed poorly enough that overall allocations to emerging markets have been falling.
Asked to size the opportunity, Arvind frames global assets under management at roughly 300 trillion dollars, combining asset owners (sovereign wealth funds, some central banks acting in that capacity, pension funds, insurance companies, endowments and foundations) with asset management companies managing their own or client money.
Against that 300 trillion dollar pool, India's public market value (equities and debt) stood at about 900 billion dollars as of the previous December, though rupee depreciation and market declines have likely brought that down to roughly 800-850 billion dollars since. That works out to under 30 basis points of global AUM. Adding private market investment (private equity, venture capital, infrastructure, real estate), which he estimates at roughly 500 billion dollars in gross flows and perhaps a trillion dollars in current value assuming a 2x return multiple, brings the total to around 2 trillion dollars, or about 60 basis points of the full 300 trillion dollar pool.
Arvind acknowledges the counterargument that not all 300 trillion dollars is realistically available for international allocation, given home country bias. Even assuming only a third of that pool, roughly 100 trillion dollars, is investible internationally, India's 2 trillion dollars in current allocation still comes out to only about 2 percent of that investible pool.
He contrasts this with India's actual footprint in the global economy:
"India's weight in global GDP is already about three and a half percent, close to between three and four percent. India's weight in global market cap is also somewhere around that region."
Yet India's weight in the MSCI All-Country World Index, the most commonly used global benchmark, is only about 1.5 percent, down from about 2 percent in September 2024 as the Indian market corrected. Since long-term investors allocate based on anticipated future growth rather than past performance, Arvind argues the benchmark allocation should reflect India's likely future share of the global economy over five, ten, or twenty years. On that basis, he believes India's allocation should realistically be 3 to 5 trillion dollars rather than the current 2 trillion, making India structurally under-allocated in global portfolios today.
Arvind identifies two separate frictions holding back this larger allocation. On the investor side, most global institutions don't make country-specific allocations at all, and the individuals responsible for country bets face real career risk. He describes the scenario of an individual allocator inside a US pension fund who makes a dedicated India allocation, only to watch India underperform for eighteen months.
"They could potentially get fired for that. So why would they take career risk?"
Changing this, he says, requires governance changes within these institutions so allocators can make broader, more considered dedicated calls on India rather than avoiding country-specific risk altogether.
On the policy side, Arvind argues Indian policymakers haven't yet internalized the scale of the opportunity. If India could realistically absorb 4 to 5 trillion dollars in global capital, spread over ten to fifteen years, that would mean 200-300 billion dollars in annual capital inflows. He believes policymakers are not currently framing reforms around a number of that scale, and that doing so would change the posture of RBI, SEBI, and the government toward foreign investors, making them more attentive to specific pain points and more willing to listen to why capital isn't flowing in at that scale.
He connects this directly to India's growth ambitions. Sustaining 8 percent real GDP growth, which he considers achievable given India's demographic transition, requires investment-to-GDP of roughly 38-40 percent. Current investment-to-GDP sits at only 30-34 percent, and domestic savings are already close to maxed out, leaving foreign capital as the necessary gap-filler, requiring 4-5 percentage points of GDP in annual capital inflows.
"This year it's zero. We know net capital flows are zero this year."
Since 1990s liberalization, RBI, SEBI, and the government have progressively opened up sectors and both public and private markets to foreign investors, which Arvind credits as real progress. But he singles out capital gains taxation of foreign investors as a specific and avoidable friction: most OECD countries leave taxation of foreign investors to their home jurisdictions, even when domestic investors face different tax treatment, whereas India taxes foreign investors directly. This raises the threshold rate of return foreign investors need before deploying capital into India, working directly against the goal of attracting more capital at a time when it is most needed. He frames tax as just one piece of a broader set of frictions around access, entry, and registration that could be reviewed wholesale if policymakers adopted the "two-to-three-trillion-dollar opportunity" framing.
Asked what lessons India might draw from other emerging markets competing for the same global capital, Arvind draws a distinction between different types of foreign inflows. Portfolio flows into equities and, increasingly, into debt (with prospective inclusion in the Bloomberg Global Aggregate bond index bringing sizable passive flows) are one category. He notes these flows are not always stable and can reverse when conditions worsen, but inclusion in major indices still reliably brings in capital.
The larger structural gap, in his view, lies in what gets categorized as foreign direct investment (FDI). A large share of India's FDI is what he calls "financial FDI", capital from private equity, venture capital, infrastructure, and real estate investors. While these investors sometimes build factories or new businesses, the bulk of this capital has concentrated in financial services, healthcare, fintech, consumer tech, and education, rather than broad-based manufacturing.
What India gets much less of, he argues, is "MNC FDI": global corporations setting up genuine manufacturing or services bases in the country. India has had real success in services through the Global Capability Centre (GCC) boom, but in manufacturing, whether producing for the domestic market or manufacturing in India for export, inflows have been limited, with Apple as one of the few visible success cases.
"We've got very little, maybe Apple is one test case for us, one success case. Otherwise, it's been Vietnam."
He points to Vietnam as the country that has captured the "China plus one" manufacturing and sourcing shift, attracting far higher FDI as a share of GDP than India by successfully hosting global corporations' manufacturing bases. Arvind suggests India needs both more financial investors, given the scale of AUM available globally, and a genuine push to attract multinational corporations to set up manufacturing or sourcing bases in India, since corporates think differently from portfolio investors: even if global asset allocators continue treating India as just another emerging market, corporates may still choose India as a manufacturing base given the sheer size of the domestic market, both to supply India and as an export platform.
He acknowledges this kind of shift is much harder to engineer than capital markets reform, since it depends on land, labor, and other factor market reforms rather than just financial market access. On the capital markets side specifically, he suggests concrete, more tractable reforms: streamlining registration and KYC requirements for global pension funds registering as foreign portfolio investors, and making entry and access processes more automatic and seamless rather than requiring redundant registration steps.
The complete transcript file is available to download below.
19 Oct 2026
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Abhishek Anand
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Sanjiv Shah
2026, XKDR | GSTIN: 27AAACX3640C1ZN
by Sane Difference
