India’s market capitalisation-to-GDP ratio slips to 95 in FY23, shows data

Reading rides on coat-tails of Rs 31-trn decline in India’s m-cap to Rs 258 trn

India’s market capitalisation (m-cap)-to-gross domestic product (GDP) ratio for the current financial year (2022-23, or FY23) could end below 100. If so, this will be the first time since 2019-20 that the reading has been in double digits.

According to Motilal Oswal, M-cap/GDP has rebounded to 112 per cent at present (of FY22 GDP), The ratio was at the highest level since CY07 (calendar year 2007).

The market only encompasses the value of all the listed companies in the country, but the GDP is the value of all incomes, which includes unlisted private companies, small businesses, MSMEs, proprietorships, partnerships, government companies, government departments etc. 

world market cap
Source : World bank

To that extent, the numerator and the denominator are not entirely comparable. 

Thirdly, the success and applicability of the Market cap to GDP ratio is higher when the market cap reflects a much larger share of economic activity in the country. 

That is why the Market Cap / GDP ratio is much above 100 in advanced countries like the US, UK and Singapore, where more of business comes under the formal sector.