India's Stock Market Growth Greatly Aiding GDP Growth

A report by the State Bank of India (SBI) says that a 1.06% increase in the market capitalization of the stock market results in a 0.06 percent improvement in the GDP growth rate of the nation.

The report further noted that, as of October, the amount of money raised through capital markets had risen from Rs 12,068 crore in 2014 to Rs 1.21 lakh crore in FY25. This considerable expansion is a reflection of both the growing investor confidence and the resilience of India's economy.

It said, "In the last 10-years, funds mobilized by Indian companies from capital markets has increased more than 10-fold."

A stronger economy, which encourages investor confidence and propels total economic growth, is indicated by a bigger market capitalization. Furthermore, an impulse response study demonstrates that a market capitalization shock of one standard deviation has a favorable effect on the actual economy, but this effect fades after three time periods.

Household stock market engagement has also increased significantly, as indicated by the survey. From 0.2 percent of GDP in FY14 to about 1 percent in FY24, savings in "shares and debentures" have grown.

The proportion of these deposits in total household savings has also increased during the same time period, rising from 1% to 5%. This suggests that households are making a larger contribution to the economy's capital requirements.

The National Stock Exchange (NSE) market capitalization has grown more than six times to Rs 441 lakh crore in FY25 (so far) compared to FY14, according to the study.