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Economic and political overview

Economic Overview

Despite global challenges, India remains the world’s fastest-growing major economy and the fifth-largest in absolute terms, expanding at 8.2% in FY23/24. Growth was driven by public investment in infrastructure and increased household investments in real estate. The manufacturing sector grew by 9.9%, while resilient services offset agriculture's underperformance. Government initiatives have aimed to strengthen manufacturing by improving the business environment, logistics infrastructure, tax efficiency, and simplifying tax rates. The latest government forecast predicts 6.4% economic growth for 2024/25, the slowest in four years, following a weaker-than-expected 5.4% growth in July-September, India’s slowest pace in seven quarters. The full-year projection expects growth to pick up in the second half, reaching 6.7%.

Concerning public finances, the Indian government aims for a narrower fiscal deficit of 4.4% of GDP for the fiscal year 2025-26, down from a revised 4.8% for the current year. To fund the deficit, gross borrowing from the market will increase to 14.82 trillion rupees ($171.26 billion), compared to 14.01 trillion rupees this year. Despite a personal tax revision expected to result in a 1 trillion rupee revenue loss, the net market borrowing will slightly decrease to 11.54 trillion rupees from 11.63 trillion rupees in 2024-25. The government also plans to transition to using debt-to-GDP as the key fiscal benchmark starting in 2026-27, with a goal of reducing debt to 50% by March 31, 2031, from the current 57.1%. Inflation has remained above the Reserve Bank of India’s comfort zone in recent months (at 5.2% year-on-year in December 2024), leading the central bank to keep policy rates unchanged for the eleventh consecutive bimonthly review in December, despite modest GDP growth in the first half of the fiscal year. Core inflation, which is below the bank's target, has also been rising, a trend that could drive up inflationary expectations and reduce consumer spending.

India overtook China’s mainland as the world’s most populous country. It also has the world’s largest youth population; nevertheless, according to the OECD, over 30% of India's youth are NEETs (not in employment, education or training). India continues to suffer from a low GDP per capita (USD 11,938 in 2024, PPP), and almost 25% of the population still lives below the poverty line. The country has made significant progress in reducing extreme poverty, halving the proportion of people living below USD 2.15 per day (2017 PPP) between 2011 and 2019 (World Bank, 2023 data). However, the pace of poverty reduction slowed in recent years, particularly during the COVID-19 pandemic, and inequalities are very strong: the richest 1% of the population own around 40% of the national wealth, while the richest 10% control about 80% of the wealth. According to the CMIE, the unemployment rate stood at 8.1% for both 2023-24 and the first 8 months of FY 2024-25.

 
Main Indicators 20232024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 3,567.553,889.134,271.924,710.375,193.51
GDP (Constant Prices, Annual % Change) 8.27.06.56.56.5
GDP per Capita (USD) 2,4972,6982,9373,2103,510
General Government Balance (in % of GDP) -8.3-7.8-7.6-7.4-7.1
General Government Gross Debt (in % of GDP) 83.083.182.681.880.8
Inflation Rate (%) 5.44.44.14.14.0
Current Account (billions USD) -23.21-44.56-56.01-75.52-93.24
Current Account (in % of GDP) -0.7-1.1-1.3-1.6-1.8

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

India is the world's fourth agricultural power in terms of value of production, despite a still low farm productivity. As a central pillar of the Indian economy, agriculture contributes 16% of the GDP and employs 44% of the active population (World Bank, latest data available). The country's main agricultural products are wheat, millet, rice, corn, sugar cane, tea, potatoes, cotton, bananas, guava, mango, lemon, papaya, and chickpea. India has the world’s largest cattle population, as well as the third-largest in fishing production in the world. The spices sector is also very pronounced, particularly the production of ginger, pepper and chilli. The crop sub-sector remains the largest contributor to the gross value of output (GVO) in agriculture and allied sectors, although its share has gradually declined from 62.4% in 2011–12 to 54.3% in 2022–23. Within the crop sub-sector, cereals and fruits & vegetables together accounted for nearly 55% of the GVO in 2022–23. Agricultural income in India has grown at an annual rate of 5.23% over the past decade. Food exports account for 11.7% of the country’s total exports, while seafood exports have surged by 29.70% from FY20 to FY24 (data Ministry of Finance). India’s Ministry of Agriculture and Farmers Welfare estimated a record grain production of 332.3 million metric tons for 2023–24, driven by all-time high yields of rice and wheat.

The industry sector employs one-fourth of the workforce and accounts for the same share of GDP (World Bank). Its main sectors include manufacturing, textiles, chemicals, automobiles, and pharmaceuticals, with manufacturing being a cornerstone of the national economy (13% of GDP). Emerging sectors such as biotechnology, renewable energy, and aerospace are gaining traction, fueled by technological advancements and government initiatives. Coal is the country's main energy source, with India being the world's second-largest producer of coal. In the manufacturing industry, textile plays a predominant role, and, in terms of size, the chemical industry is the second-largest industrial sector. The industrial sector expanded by 6% in the first half of FY25 and is projected to grow by 6.2% for the full fiscal year. Growth was robust in Q1, reaching 8.3%, but slowed in Q2. The deceleration was largely driven by a sharp decline in manufacturing exports, impacted by weak demand from key destination markets and intensified trade and industrial policies in major trading nations (data Ministry of Finance).

The services sector is the most dynamic of the Indian economy. It contributes to almost half of GDP (49.6%), but it only employs 31% of the workforce. Key sectors include information technology and IT-enabled services (ITES), which have propelled India onto the global stage as a technology hub, with cities like Bangalore and Hyderabad emerging as major IT centres. The rapidly growing software sector has been boosting the export of services and modernising the Indian economy: the country has capitalised on its large educated English-speaking population to become a major exporter of IT services, business outsourcing services and software workers. Additionally, the financial services industry, including banking, insurance, and capital markets, plays a crucial role in supporting economic growth and facilitating investment. India's healthcare sector is also rapidly expanding, driven by increasing demand for quality healthcare services. Furthermore, the education and hospitality sectors are experiencing growth, fueled by rising domestic and international demand. Emerging sectors include e-commerce, renewable energy, and digital entertainment. As per the Ministry of Finance, the services sector posted strong growth in both Q1 and Q2, resulting in a 7.1% expansion during the first half of FY25. Growth for the full fiscal year is projected at 7.2%, supported by robust activity in financial services, real estate, professional services, public administration, and defence.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 43.5 25.0 31.5
Value Added (in % of GDP) 16.0 25.0 49.6
Value Added (Annual % Change) 1.4 9.5 7.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Indian Rupee (INR) - Average Annual Exchange Rate For 1 USD 67.2065.1268.3970.9074.67

Source: World Bank - Latest available data.

 

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Foreign Trade

India used to be a protectionist state for a long time, but the country has become progressively more open to international trade. Currently, trade represents 46% of its GDP (World Bank). According to figures from the Ministry of Commerce, in the 2023-24 FY, exports were led by mineral fuels and oils (20.0%), electrical machinery and equipment (7.9%), pearls, precious stones, and jewellery (7.5%), nuclear reactors, boilers, and machinery (6.9%), pharmaceutical products (5.1%), vehicles and parts (4.8%), and organic chemicals (4.6%); whereas imports comprised chiefly mineral fuels and oils (32.3%), electrical machinery and equipment (11.7%), pearls, precious stones, and jewellery (11.6%), nuclear reactors, boilers, and machinery (8.5%), organic chemicals (3.9%), plastic and articles (3.2%), and iron and steel (2.7%).

In the same period, India’s main export partners were the U.S. (17.7%), the United Arab Emirates (8.2%), the Netherlands (5.1%), China (3.8%), Singapore (3.3%), and the United Kingdom (3%). The main import origins were China (15.0%), Russia (9.0%), the United Arab Emirates (7.1%), the U.S. (6.2%), Saudi Arabia (4.6%), Iraq (4.4%), and Indonesia (3.5% - data Ministry of Commerce). The country has signed numerous free trade agreements, including one recently signed with Mercosur. However, the trade regime and regulatory environment still remain relatively restrictive.

The country's trade balance is structurally negative, given that India imports nearly 80% of its energy needs. However, as India benefits from the fluctuations in world hydrocarbon prices for its imports, the trade deficit has been oscillating for the past few years. In 2023, India exported USD 432 billion worth of goods, while imports accounted for USD 672.6 billion (-4.7% and -6.6% y-o-y, respectively). According to WTO figures, in the same year, exports of services amounted to USD 344.5 billion (+11.3% y-o-y), whereas the imports stood at USD 248.3 billion (stable y-o-y). The overall trade deficit for 2023 was estimated at 2.2% of GDP by the World Bank. According to the latest figures from the Ministry of Commerce and Industry, cumulative exports of goods and services during April-December 2024 were estimated at USD 602.6 billion, reflecting a 6% increase from USD 568.36 billion in the same period of 2023.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 486,059373,202573,092720,441672,667
Exports of Goods (million USD) 324,340276,410395,426453,415432,001
Imports of Services (million USD) 179,430153,782195,956249,391248,356
Exports of Services (million USD) 214,762203,401240,660309,372344,500

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 39.937.845.450.045.9
Trade Balance (million USD) -157,678-95,450-176,721-267,188-245,473
Trade Balance (Including Service) (million USD) -73,452-8,342-74,039-134,661-86,330
Imports of Goods and Services (Annual % Change) -0.8-12.622.110.610.9
Exports of Goods and Services (Annual % Change) -3.4-7.029.613.42.6
Imports of Goods and Services (in % of GDP) 21.219.124.026.824.1
Exports of Goods and Services (in % of GDP) 18.718.721.423.221.8

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 3.54.13.83.73.7
Volume of imports of goods and services (Annual % change) 4.46.06.15.96.0

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
India is a member of the following international economic organisations: IMF, South Asian Association for Regional Cooperation (SAARC), Association of Southeast Asian Nations (ASEAN) (dialogue partner), ICC, Colombo Plan, Commonwealth, G-15, G-20, G-24, G-77, WTO, among others. For the full list of economic and other international organisations in which participates India click here. International organisation membership of India is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by India can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
United States 17.6%
United Arab Emirates 7.7%
Netherlands 5.4%
China 3.8%
United Kingdom 2.9%
See More Countries 62.8%
Main Suppliers
(% of Imports)		 2023
China 18.1%
United States 6.3%
United Arab Emirates 5.6%
Saudi Arabia 5.2%
Indonesia 3.6%
See More Countries 61.3%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Droupadi Murmu (since 25 July 2022) - BJP
Prime Minister: Narendra Modi (since 26 May 2014) – BJP
Next Election Dates
Presidential: August 2027
Council of States: January 2026
House of the People: April 2029
Current Political Context
In order to elect all 543 members of the Lok Sabha, India conducted general elections in seven phases between April 19 and June 1, 2024. To secure his third term as prime minister, Prime Minister Narendra Modi announced on June 7, 2024, that he had secured the backing of 293 Members of Parliament for President Droupadi Murmu. With the Telugu Desam Party (TDP) from Andhra Pradesh and the Janata Dal (United) from Bihar emerging as important allies, this was also his first time leading a coalition administration (in the 2014 and 2019 elections, his Bharatiya Janata Party had already won an absolute majority). The Indian National Congress (INC) and numerous regional parties created the Indian National Developmental Inclusive Alliance (INDIA) in 2023, which served as the main opposition. Although the NDA as a whole won 293 of the 543 seats in the Lok Sabha, the BJP lost its sole majority and gained 240 seats, down from the 303 it had won in 2019. With 234 seats, 99 of which were won by the Congress, the INDIA alliance exceeded expectations and became the formal opposition for the first time in a decade.
 Since Russia invaded Ukraine, New Delhi has been heavily criticized by the West for not joining international sanctions and for not denouncing the attack. Economic relations between Russia and India have greatly improved as a result of Western sanctions that have restricted Russia's access to international markets. In 2024, Indian Prime Minister Narendra Modi made two trips to Russia after a five-year hiatus, reinforcing the value that both nations take on their relationship.
Main Political Parties
The main parties in India include:

- Bharatiya Janata Party (BJP): right-wing, pro-Hindu, nationalist ideology; heads the National Democratic Alliance (NDA) coalition and has been the ruling political party of India for the past decade
- Indian National Congress (INC): centre to centre-left, big tent party, social democratic, secular; a major party involved in the independence movement; heads the Indian National Developmental Inclusive Alliance opposition coalition
- Samajwadi Party (SP): socialist, left-wing
- All India Trinamool Congress (AITC): centre to centre-right, Bengali nationalist, populist
- Dravida Munnetra Kazhagam (DMK): centre-left, social democratic, regionalist
- Yuvajana Sramika Rythu Congress Party (YSRCP): centre-left, regional, based in the state of Andhra Pradesh
- Janata Dal (United - JDU): socialism, left-wing
- Shiv Sena (SHS): right-wing, conservatism
- Biju Janata Dal (BJD): centre to centre-left, social democratic, liberal, populist
- Bahujan Samaj Party (BSP): centre-left, social equality. India's third major political party, whose electorate is mainly composed of Dalits and low castes
- Bharat Rashtra Samithi (BRS): centre, populism
- Telugu Desam Party (TDP): centre-right, neoliberal, populist, regionalist
- Communist Party of India (CPI): far-left, Communist, Marxist-Leninist
- Nationalist Congress Party (NCP): centre to centre-left, nationalist
- National People's Party (NPP): centre to centre-left, regionalist, ethnocentrist
- Aam Aadmi Party (AAP): centre-left, populist
Executive Power
The President is the Chief of State and the Commander-in-Chief of the Armed Forces. While the President is the Commander-in-Chief of the armed forces, the role is largely ceremonial in practice, with defense decisions being made by the government. The President acts on the advice of the Council of Ministers, led by the Prime Minister. He/she is indirectly elected for a five-year term by an electoral college, which consists of elected members of both houses of Parliament as well as the legislative assemblies of each of India's states and territories.
The Prime Minister is the Head of Government and is chosen by Lok Sabha members (House of the People, lower chamber) of the majority party, following legislative elections, to serve a term of five years. The President, on the recommendation of the Prime Minister, appoints the Cabinet.
Legislative Power
The Indian legislature is bicameral. The Parliament consists of the Council of States (Rajya Sabha) and the House of the People (Lok Sabha). The Council of States has 245 members serving a six-year term, while the House of the People has 543 members serving a five-year term, plus 2 additional members of the Anglo-Indian Community nominated by the President.
 

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