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The penetration of the Indian mutual fund industry is very low. India’s MF AUM to GDP ratio is significantly lower at 15.9% in March 2022, compared to the world average of 75%, shows the IPO prospectus of KFintech.
In fact, India’s AUM to GDP ratio is much lower than many developed economies such as the US. at 148.9% and the UK at 74.8%.
In Southeast Asian countries and Hong Kong, Singapore has the highest mutual fund penetration of 179.9% whereas Indonesia and Philippines have the lowest mutual fund penetration of 3.8% and 2.3%, respectively.
India’s neighbour China has the AUM to GDP ratio of 20.9% as on March 2022.
Let us look at the table:
Further, the ratio of the equity mutual fund AUM to GDP in India is considerably low at 8% compared with 98% in the US, 48% in UK, 44% in Japan, and 34% in South Africa at the end of calendar year 2021.
Interestingly, over the last six months, the MF industry has seen growth in AUM to GDP ratio. The mutual fund AUM to GDP ratio, which indicates its penetration has touched a new high of 16.9% in September 2022 due to record high inflows, rally in equity markets and a hit on India’s GDP due to the pandemic, reveals KFintech IPO prospectus.
KFintech said, “This is due to increasing penetration across geographies, strong growth in capital markets, technological progress, and regulatory efforts aimed at making mutual fund products more transparent and investor friendly. Although mutual fund AUM as a percentage of GDP grew from 4.3% in Fiscal 2002 to approximately 16.9% at end of September 2022, penetration levels remained well below those in other developed and fast-growing peers.”
Overall, the report pointed out that under penetration of mutual funds in India and an opportunity to earn annuity income once the fund builds up a good book of assets are the main attractions for many players to foray into the mutual fund business.
