Why the World Bank Believes in the Long-Term Potential of the Indian Stock Market

Despite the prevalence of adverse macroeconomic conditions worldwide, India is expected to emerge as a “shining light” for potential investors (us!), says the World Bank. This can be attributed to the growing popularity of renewable energy projects and continuous government efforts to improve income and consumption levels in rural areas. 

Madhya Pradesh in the Limelight

The World Bank has emphasised on the strategic geographical advantages enjoyed by Madhya Pradesh as a key driver of India’s renewable energy industry. By 2030, the MP state government aims to meet 50% of its annual power consumption through clean sources. This is expected to increase stock market prices for energy companies in India. 

On 28 February 2025, the state government launched the Madhya Pradesh Renewable Energy Policy 2025 with the objective of incentivising the development of clean energy projects. It aims to attract investments worth ₹100 billion for creating adequate infrastructure for manufacturing renewable energy generation equipment. 

The increasing adoption of renewable energy sources by rural households is expected to reduce their electricity bills and further increase rural consumption. This is further expected to impact the market dynamics favourably. 

Growth of Monthly Per Capita Consumption Expenditure (MPCE)

The Ministry of Statistics and Programme Implementation publishes the MPCE to analyse the living standards of different households and estimate the number of households living below the poverty line. 

As per the Ministry of Statistics and Programme Implementation, the MPCE in rural areas of Odisha has witnessed the highest growth rate from FY 2022-23 (14%). Moreover, Kerala (18%) and Punjab (27%) have witnessed a significant decline in urban-rural MPCE differences. This is expected to favourably impact stock market performance in the long-run. 

In FY 2023-24, the Indian GDP recorded a growth rate of 8.2%. As the number of salaried employees and wage earners under government programs in rural India increases, expenditure on food products is expected to increase, thereby benefiting the stock market prices of FMCG companies. 

Based on government sources, food accounts for nearly 47% of the average household consumption in rural India. Beverages, processed foods, and refreshments are extremely popular (9.84%), followed by milk and dairy products (8.44%), and fresh vegetables (6.03%). This is creating a favourable outlook for the Indian stock market. 

Conclusion

As India strives to become a “vishwa-guru”, sustainable economic growth is expected to remain its key priority. With increasing government expenditure on the expansion of renewable energy projects, the Indian stock market is expected to pick up pace and generate steady returns for investors. Rising rural consumption is also favouring the overall economic outlook. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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