India's MFs Industry Lags Behind Global Peers

Despite over Rs 45,000 crore of monthly investments in India's mutual funds, the Industry's assets under management (AuM) to GDP ratio is much less as compared to the world average says a report by financial services firm Prabhudas Lilladher (PL).

"Indian AMC space is materially underpenetrated compared to global peers since, AuM to GDP ratio is much lower at 16 per cent for India than world average (63 per cent) and US (140 per cent) Canada (100 per cent), France (99 per cent), UK (79 per cent), Germany (76 per cent), Japan (49per cent) and China (21 per cent)." said the report.

The report highlighted that despite significant growth of investments in mutual funds by Indian retail investors in recent years, there is still a long way to go if compared with global peers.

The Indian mutual fund industry's AuM as a share of GDP has risen from 4.3 per cent in FY02 to 16 per cent in CY20. 

However, the Industry has much higher growth potential, as of March 2022 only 34 million people in India invest in mutual funds as compared to the country's 140 billion population. The report highlights that this relatively low penetration provides a large scope for strong growth ahead.

The report also sheds light on the allocation of household savings in India. Of the 41 per cent of household savings invested in financial assets, the majority is held in cash, while mutual funds account for a mere 2 per cent of these savings. This suggests that Indian households are still reluctant to explore mutual funds as a viable investment option.

Additionally, out of over 435 million PAN card holders in India, only 70-80 million file their tax returns, and the mutual fund investor base is even smaller, at just 34 million unique investors. This data highlights the potential for mutual fund participation to expand substantially as more individuals become aware of and comfortable with this investment option.

The report concludes with optimism about the future, projecting that the mutual fund industry's unique client base could grow considerably as mutual funds gain wider acceptance as a preferred saving and investment tool. (ANI)