India’s equity market could nearly double in size to $10 trillion over the next four to five years, driven by strong economic growth, disciplined regulation, and a deepening culture of financial participation, according to Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services.
Speaking to CNBC-TV18 on the sidelines of the release of Motilal Oswal’s 30th Wealth Creation Study, Agrawal said India is already well ahead of the curve in terms of financialisation, even though per capita income remains under $3,000.
“We have a $5 trillion market today, and in the next four to five years, we will have a $10 trillion market given the disciplined way in which the system is being managed,” Agrawal said. “Our regulators have been disciplined, and the financial system has been managed well.”
Financialisation without fear
Addressing concerns around whether India may be over-financialising at a relatively low level of per capita income, Agrawal argued that markets are inherently self-correcting and anchored to earnings growth.
“Unless there are corporate earnings, nothing will be supported,” he said. “Valuations may move from 22 to 24- or 25-times earnings, but then supply will come. When markets get overheated, there is a lot of supply of paper. When markets get depressed, supply evaporates.”
He dismissed fears of excesses building up structurally, pointing out that equity markets respond dynamically to changes in valuations and profitability.
Market cap-to-GDP no longer a hard ceiling
Agrawal also highlighted the structural shift underway in how wealth is created and measured, arguing that traditional valuation anchors like market capitalisation-to-GDP ratios need to be reinterpreted.
He noted that the so-called Buffett Ratio — market cap as a proportion of GDP — was long believed to have a ceiling of around one. India’s ratio has risen from about 0.5 in 2005 to around 1.3 in 2025, reflecting deeper markets and rising participation.
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“In the US, this ratio is already at 2.3 times, with about $71 trillion of market cap and $30 trillion of GDP,” Agrawal said. “Buffett himself had suggested the limit could be as high as five times.”
According to him, rising market capitalisation creates a virtuous cycle. Wealth generated in financial markets feeds into higher consumption, investment, and savings, which in turn supports economic growth and corporate profitability.
“This is the new invisible hand,” he said. “Markets and wealth creation are allocating capital, deciding where savings go, and redirecting them through the stock market into the real economy.”
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Below is the verbatim transcript of the interview.
Q: What is the key structural shift in wealth creation that stood out to you, particularly in how the very form of wealth has evolved over time?
Agrawal: I’ve been a student of wealth creation for a long time, but one thing that didn’t strike me earlier is that the form of wealth itself has undergone a major change.
If you look back 200 or 300 years, before companies came into being, what was wealth? The concept of wealth was very physical. You had land, gold, silver, maybe a palace — tangible assets. If you ask today, who were the kings then — Shah Jahan, Akbar, or some European monarch — they all had physical wealth.
Now look at who the “kings” are today: Elon Musk, Bill Gates. What do they have? Does anyone ask how many acres of land they own, how many palaces they have, or how much gold they hold? No. They only have market capitalisation. It’s all paper wealth.
So, from physical wealth, the world transitioned to paper wealth, and now paper is becoming digital wealth. The concept of securitisation led to this entire creation of wealth. When you start issuing stocks, with the advent of joint-stock companies and public participation, that’s where this wealth machine started. Now it has become gigantic — and that’s what this book is all about. The world is getting wealthier, and India is getting wealthier faster.
Q: You are a Buffett bhakt. One metric he looks at is market cap to GDP. You write in the report that traditionally this had a ceiling of one.
Agrawal: Buffett wrote about this in 2000. That was a seminal observation, which is why this ratio is called the Buffett Ratio. Market cap to GDP was not compared earlier. He said one times GDP was a kind of glass ceiling — a good level for market highs, while lows could be 40%, 50% or 60%. That was the earlier thinking, and that’s how even we were shaped.
GDP is a very large number, so it seemed logical that this would be the ceiling. But now, in the US, it is at 2.3 times — about $71 trillion of market cap and $30 trillion of GDP. That is a very different level. Buffett himself had suggested the limit could be as high as five times.
There is a virtuous cycle at work. Wealth is created in the market, and that wealth creates a wealth effect. If I create wealth, I buy a bigger house, cars, donate more, spend more. That wealth melts into the real economy.
Apart from income-led growth, there is a wealth effect in the economy. Together, they propel higher economic growth, higher corporate profits and further wealth creation. This virtuous cycle continues.
That is what is happening in the US, and India is fortunate to have this. It doesn’t work in every country. This machine of securitisation or capitalisation works only in a few countries, mainly Western economies. This is the new invisible hand — markets and wealth creation allocating capital, deciding where savings go, and redirecting them through the stock market into the real economy.
Q: India’s per capita income is under $3,000. Globally, this level of access to financial products usually happens at a much higher per capita income. It’s already happened here. Are there implications? Is it a good thing or a bad thing?
Agrawal: It’s a fantastic thing. We have a $5 trillion market today, and in the next four to five years, we will have a $10 trillion market, given the disciplined way in which the system is being managed. Our regulators have been disciplined, and the financial system has been managed well.
Q: Is there a risk of over-financialisation at this level of per capita income?
Agrawal: Markets are self-correcting. You don’t have to worry unnecessarily. Unless there are corporate earnings, nothing will be supported. Valuations may move from 22 to 24 or 25 times earnings, but then supply will come.
The moment markets get overheated, there is a lot of supply of paper. When markets get depressed, supply evaporates.
Q: In the report, you’ve created the India@100 portfolio for 2047. At a time of rapid technological change — AGI, superintelligence — how do you frame such a long-term view?
Agrawal: This is where the multi-trillion-dollar framework comes in. We went from the NTD era — from one to four. We wrote the first paper when India was around $1 trillion.
We examined what happened over the last 17 years — what we said and what actually happened. Directionally, we were right, though it took five years longer because of Covid and demonetisation.
Now it’s a multi-trillion journey — from four to sixteen. In the next 17 years, India is likely to become a $16 trillion economy by around 2040–42. We are not economists. We are extrapolating what has happened in the past, and there is no reason to believe otherwise.
Q: The assumption is around 12% nominal growth for the next 17 years. You think we shouldn’t quibble too much about whether it is 10% or below?
Agrawal: Don’t bother about it. It could be 13%, it could be 11%, or even 10%. That just means 2042 could be 2040 or 2044.
The journey from four to sixteen will not be without potholes. There will be troubles — Covid, demonetisation, geopolitics, something else. Every trouble has a different name. The GFC happened earlier.
But 17 years out, we will be a $16 trillion economy. That faith is important. It could be 15 years or 19 years, but it won’t be 27. The base is much larger now.
When four goes to sixteen, the delta is $12 trillion. In the last cycle, the delta was only $3 trillion. That’s a fourfold injection of wealth.
On top of that, market capitalisation could be $20–25 trillion in the next 17 years. These may sound like big numbers, but they will happen.
Q: As you write in the report, in 2008 too, directionally you were right, but timing was slightly off.
Agrawal: Yes, but it could be earlier this time. Earlier, there was policy paralysis. Today, things are run better, but there is no guarantee they will be run perfectly for 17 years.
After good runs, there can be sloppy phases. That’s why you keep a broad range.
Once you accept this, how do you play it? When per capita GDP crosses $3,000 to $3,500, consumption explodes. India is under-penetrated in almost everything.
At $4,000 per capita, the biggest change is in car demand. That was China’s experience — they went from four million cars to 25 million in a few years.
This journey will happen in India in an accelerated fashion — discretionary consumption, premium food, housing, transportation, entertainment, travel and cars. Beyond that, the biggest boom will be in savings and investments.
What lies ahead is much bigger than what we’ve already seen.
Q: You identify financials, including capital markets, and consumer durables as big areas.
Agrawal: Yes. Cars are one big item. Houses are even bigger. The ticket size of housing is much larger, but real estate is deeply cyclical, with many suppliers.
Cars have fewer suppliers and are more secular.
Making money in markets is different from talking macro. The companies we suggest are a framework, not givens. You have to buy companies that are either unknown or large but unpopular.
When you marry the right theme with that thought process, that’s how you get multi-baggers.
