Can India's Capital Markets Finance The Next Trillion-Dollar Economy? - Ajay Garg

India's aspiration to become a multi-trillion-dollar economy is no longer just an economic milestone. It is a financing challenge that we must prepare for. With a nominal GDP of around USD 4.15 trillion in 2026, India has already established itself as one of the world's largest economies. The next phase of growth, however, will require significantly higher levels of investment. Every new manufacturing facility, semiconductor plant, renewable energy project, data centre and logistics corridor will require long-term capital. The question is no longer whether India can grow. The real question is whether our capital markets are ready to finance that growth.

In my view, the answer is yes, but with an important caveat. India has made remarkable progress in deepening its capital markets. The next phase of development, however, will require us to broaden and strengthen them even further.

For decades, bank credit has been the primary source of financing for businesses. That model has served India well. But the investments required over the next decade across infrastructure, manufacturing, clean energy, defence, digital technologies and urban development are too large and too long-term to depend on bank lending alone. Capital markets must play a much bigger role in connecting household savings with productive investments.

As of March 2026, the market capitalisation of India's listed companies stood at nearly ₹412 trillion, equivalent to over 133% of GDP. At the same time, the number of demat accounts crossed 21.6 crore, while the country now has more than 12 crore unique investors. These are not merely milestones for the securities industry. They reflect a structural shift in how Indian households approach wealth creation.

Nothing illustrates this shift better than the mutual fund industry. Assets under management have grown to over ₹82 lakh crore as of June 2026, underscoring the increasing role of mutual funds in household financial savings. Monthly SIP contributions have remained above

₹30,000 crore for four consecutive months, reaching a record ₹31,781 crore in June 2026. Behind these figures are millions of investors who are choosing disciplined, long-term investing over idle savings. That steady flow of domestic capital is strengthening India's financial foundation.

One of the most encouraging developments has been the growing resilience of domestic investors. A few years ago, Indian markets were heavily influenced by foreign portfolio flows. Today, sustained participation from retail investors and domestic institutions has helped cushion periods of global uncertainty. This shift is making our markets more stable and reducing their dependence on overseas capital. What excites me most is that this resilience is increasingly

being driven by domestic savings. That makes India's growth story stronger and more sustainable.

India is entering what could be one of its largest investment cycles. Renewable energy, semiconductor manufacturing, defence production, data centres, logistics, urban infrastructure and artificial intelligence will require enormous amounts of patient capital. Bank lending alone cannot finance this transformation. Public markets, corporate bonds, REITs, InvITs and alternative investment vehicles must all become integral parts of India's financing ecosystem.

The increasing number of IPOs across manufacturing, financial services and technology sectors reflects this changing landscape. FY26 marked a historic year for India's primary markets, with 108 companies raising nearly ₹1.76 lakh crore through mainboard IPOs, underscoring the growing role of public markets in financing corporate expansion.

More companies are turning to public markets to raise growth capital instead of relying solely on bank credit. For businesses, this reduces dependence on a single source of funding. For investors, it opens the door to participate in India's emerging growth sectors. This creates a virtuous cycle where capital formation and wealth creation reinforce each other.

Yet, there is still work to be done.

India's corporate bond market remains relatively underdeveloped compared with mature economies. Broadening the issuer base, improving market liquidity, expanding the range of bond products, and encouraging greater participation in REITs and InvITs will be essential. These reforms will help create a more diversified financing ecosystem and reduce excessive dependence on traditional funding sources.

Equally important is preserving investor confidence. India's capital markets have earned credibility through strong regulation, transparent disclosures and technology-driven market infrastructure. As participation continues to widen, maintaining these strengths will be just as important as expanding the markets themselves.

Financial literacy deserves equal attention. Bringing more investors into the market is only half the task. Helping them understand risk, diversify wisely and stay invested for the long term will determine the quality and sustainability of market participation.

India has never lacked savings. The challenge has always been ensuring that those savings are channelled into productive investments that create businesses, jobs and infrastructure. That is where deep, efficient and inclusive capital markets make the greatest difference.

India's next phase of growth will depend not only on how much we save but also on how effectively we invest those savings. Capital markets are the bridge between the two.

I believe India's capital markets have reached an important inflection point. They are no longer merely reflecting economic progress; they are actively financing it. If we continue to deepen market participation, strengthen debt markets and preserve investor trust, our capital markets will not just support India's next trillion-dollar economy. They will transform India's savings into the capital that powers its next era of growth.

"Investment in securities market are subject to market risks, read all the related documents carefully before investing."

"Mutual fund investments are subject to market risks, read all scheme related documents carefully."

Author & Entity Registration Details:

• Author: Ajay Garg (Director & CEO)

• Entity Name: SMC Global Securities Limited

• SEBI Registration No: INZ000199438 (Member: NSE / BSE / MCX / NCDEX)

• Research Analyst Reg No: INH100001849

• AMFI Registered Mutual Fund Distributor: ARN No. 29345

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