India ETFs Offer Compelling Growth Upside: Is the Risk Worth Taking?

Core Insights - The Nifty 50 Index has declined approximately 1.87% in early 2026 due to tariff concerns and foreign equity outflows [1] - Despite short-term volatility, India ETFs present a strong long-term growth opportunity, with the index up about 1.63% over the past six months and nearly 8.41% over the past year [2] Economic Outlook - India's economic outlook is optimistic, supported by favorable demographics, a growing base of young investors, increasing AI investments, advancements in chip design and digital infrastructure, and rapid digital transformation [3] - The OECD projects India's real GDP growth at 6.7% in 2025 and 6.2% in 2026, driven by resilient domestic demand and digitalization [6] Market Pressures - Uncertainty regarding U.S. tariffs poses a significant challenge, with tariffs on Indian goods reaching up to 50% and potential increases for nations purchasing Russian oil [4] - Foreign investors have sold $900 million in Indian shares in January 2026, following a record $19 billion in sales the previous year [5] Growth Projections - India's economy is expected to grow by 7.4% in the fiscal year ending in March, surpassing initial estimates of 6.3%–6.8% [7] - Private consumption, accounting for nearly 60% of GDP, is projected to grow by 7% year-on-year, while government spending is expected to increase by 5.2% [8] Investment Opportunities - Short-term challenges may increase market volatility, but India's long-term economic fundamentals remain strong, presenting investment opportunities [14] - Recommended India ETFs include iShares MSCI India ETF (INDA), WisdomTree India Earnings Fund (EPI), and Franklin FTSE India ETF (FLIN), with INDA being the largest at $9.58 billion in assets [15][16]