Sadiq Adatia’s February trip to Mumbai and New Delhi to meet with company executives and politicians reinforced his bullish view of the world’s most populous country.
“The middle class has continued to evolve, and continues to be a bigger part of the economy,” said the chief investment officer of BMO Global Asset Management. “I would almost put India where China might have been 10 years ago.”
The $189-million BMO MSCI India Selection Equity Index ETF is the largest of three Canadian-listed India ETFs, and has been offered since January 2010. Its long-time rival, launched in the same month, is the $134-million iShares India Index ETF. A credible challenger is the $8-million Franklin FTSE India Index ETF, which made its debut in August of last year.
Though its stock-market size is relatively small, India is a world-class heavyweight in other respects. It ranks first in population, at more than 1.47 billion. Its projected GDP this year is the world’s fourth largest, according to the International Monetary Fund (IMF). And the IMF projects 6.2% GDP growth for India in 2026, ahead of China’s 4.2% and far higher than any of the G7 countries including Canada.
A sobering metric, also from the IMF, is that India’s projected GDP per capita is a mere US$3,051. That’s far lower than any major country including Canada, whose comparable figure is US$58,244. China, whose population is almost as high as India’s, has a projected GDP per capita of US$14,730, more than four times greater.
Adatia is convinced that India will narrow that huge gap, driven mostly by domestic growth. “They’re still in the growth phase, and therefore you’re seeing the ability to … to drive higher growth on a year-over-year basis.”
The growing middle class in India, said Adatia, is moving up on the spectrum of consumer spending, adding to their discretionary purchases in addition to consumer staples. “That again is very good for the GDP, very good for a lot of those companies that are tied to that.”
Favourable demographics will help drive a consumption-driven economy in India for decades, said Ahmed Farooq, senior vice-president and head of retail ETF distribution, with Franklin Templeton Canada in Toronto. He noted that about half the population is under the age of 25, and 65% is under 35.
“It’s a very long-term secular growth story,” said Farooq, “where you also have a democratic-type government in place, and you also have countries trying to build trade relations with them as well.”
The major new trade development was the accord reached in January with the European Union, which will eliminate or reduce tariffs on nearly all exports and imports.
With its North American trading partners, India will benefit from a lowering of U.S. tariffs following the U.S. Supreme Court’s ruling that President Donald Trump’s previously imposed global tariffs are illegal. Canada, meanwhile, is negotiating its own trade deal with India.
Three Canadian-listed options
Farooq said the Franklin ETF is designed to provide broad, passive and cheap exposure to India. It tracks the FTSE India RIC Capped Index, which has about 275 constituent companies and embraces about 90% of India’s total stock-market capitalization.
Though its Canadian assets are small, the ETF enjoys effective economies of scale by investing in the U.S.-listed Franklin FTSE India ETF, which has assets of US$3 billion.
With a management fee of 0.19%, the Franklin’s Canadian-listed ETF is the cheapest of its peer group and there’s no duplication of fees with its U.S. affiliate. Though the fund is too new to publish a management expense ratio, it should remain the low-cost provider after expenses are also included.
Taking a much more selective approach is BMO’s ETF, which currently has 55 holdings. Its objective is to replicate the performance of the MSCI India Selection Index, which invests in companies that have been assigned higher environmental, social and governance (ESG) ratings by MSCI.
Additionally, the ETF excludes securities of companies that earn significant revenues from tobacco, alcohol, gambling, weapons and civilian firearms and nuclear power.
BMO’s Adatia acknowledges that the strategy narrows the opportunity set for the ETF. But, he added, the screening is worthwhile from the perspective of good governance and oversight in a market that’s more difficult to be able to assess properly. “That’s the lens that we had brought to this fund,” he said. “And we’re happy with how it’s been going.”
ESG screening hasn’t hurt the BMO ETF’s ability to compete against its long-term rival. Through Feb. 28, its 11.9% return over 10 years has outperformed iShares India Index’s 9.3%.
The iShares ETF seeks to replicates India’s S&P Nifty 50 Index, which provides exposure to 50 of the country’s largest companies. It obtains this exposure primarily by investing in its affiliate, the U.S.-listed iShares India 50 ETF.
The iShares ETF is more expensive than its BMO competitor, though over the past year the gap has narrowed. In September 2025, iShares cut its management fee to 0.74%, down from 0.98%. When expenses are included, the iShares MER remains higher at 0.99%, versus 0.67% for BMO.
A differentiating factor that iShares investors in non-registered accounts might not appreciate is the unusually high distribution of $6.955 that the ETF made on Dec. 29, which caused its net asset value to drop the next day by a similar amount. This would be less tax-efficient than a fund that made only a small distribution, as the iShares ETF did in December 2024.
The iShares payout at year-end 2025 resulted in a 12-month trailing distribution yield of 15.18%. The accuracy of this extraordinarily high yield was confirmed by sponsor BlackRock Asset Management Canada Ltd., but repeated attempts to obtain an explanation were unsuccessful.