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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

According to the IMF, the Indian economy grew by an estimated 9.5% in 2021, mainly driven by strong exports and domestic private investment. The measures put in place by the government to contain the virus have aggravated pre-existing issues throughout the country. Private consumption is likely to recover slowly due to a weak outlook, as an increase in unemployment brought by the pandemic sent millions of migrant workers back to rural areas, as jobs in cities were lost. Still, according to the IMF, the economy is expected to continue a steady growth in the coming years, registering an estimated GDP growth of 8.5% in 2022 and 6.6% in 2023.

India’s broad range of fiscal stimuli and health responses to the pandemic have proven their effectiveness in 2021, as they supported the country's continuing recovery and helped to mitigate the long lasting impacts of the COVID-19 crisis. The country’s general government deficit stood at -9.4% by the end of 2021, and should decrease slightly in 2022 and 2023, reaching -9.2% and -8.6%, respectively. According to the IMF, the inflation decreased to 5.6% in 2021, and is expected to decrease to 4.9% in 2022 and 4.3% in 2023. The level of public debt remains high - it was estimated at 90.6% in 2021 - but is expected to decrease in the next two years, to 88.8% in 2022 and 88.1% in 2023. The government is focused on reducing inequality, as it seeks to implement growth oriented reforms to get the economy back on track, such as MSME incentives, infrastructure sector boost, agriculture infrastructure, micro food enterprises, increased public employment outlay, and special liquidity window. According to the government, the MSME sector is crucial for the inclusive growth of the economy and, as such, it's become a major priority, with various programmes for the development and promotion of MSMEs being put in place across the country.

India is expected to overtake China as the world’s most populous country by 2024. It 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 2,098), and almost 25% of the population still lives below the poverty line (about one-third of the world’s population living on under USD 1.90/day lives in India) and the country's inequalities are very strong: the richest 1% of the population own 53% of the country’s wealth. Additionally, the informal sector, where the vast majority of India’s labour force is employed, has been particularly affected by the COVID-19 pandemic, increasing their risk of slipping back into poverty. According to the CMIE, India's unemployment rate stood at 7.7% of total labour force in 2021.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 2,870.502,660.242,946.063,250.083,515.19
GDP (Constant Prices, Annual % Change) 4.0-7.39.09.07.1
GDP per Capita (USD) 2,0991,930e2,1162,3132,479
General Government Balance (in % of GDP) -7.4-8.9-9.4-9.2-8.6
General Government Gross Debt (in % of GDP) 74.189.6e90.688.888.1
Inflation Rate (%) 4.86.25.64.94.3
Current Account (billions USD) -24.5524.01-30.37-44.64-52.04
Current Account (in % of GDP) -0.90.9-1.0-1.4-1.5

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

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. As a central pillar of the Indian economy, agriculture contributes 18.3% of the GDP and employs 42.6% of the active population. The country's main agricultural products are wheat, millet, rice, corn, sugar cane, tea, potatoes, cotton, bananas, guava, mango, lemon, papaya and chickpea. India is also the fifth largest producer of cattle and sheep, as well as the second largest in fishing production in the world. The spices sector is also very pronounced, particularly the production of ginger, pepper and chili. In 2021, agriculture was a key sector in India’s economic recovery from the COVID-19 crisis as the industry registered a sustained and robust growth. That's because the pandemic led many who lived in India's cities to move back to their ancestral lands, which resulted in a boost of agricultural activity.

The industry sector employs 25.1% of the workforce and accounts for 23.5% of GDP. Coal is the country's main energy source, with India being the world's third 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. After a sharp decline in industrial production experienced in the early days of the pandemic, 2021 saw a significant increase in industrial output. Although a rebound in manufacturing was seen throughout the entire secondary sector, the greatest recovery was registered in the cement and steel industries.

The services sector is the most dynamic part of the Indian economy. It contributes to almost half of its GDP (48.8%), but it only employs 32.2% of its workforce. 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. Although the services sector was hit the hardest during the early days of the pandemic, it showed a steady recovery in 2021 as vaccination rates rose and people's mobility increased. The sector's recovery was mainly driven by customer-facing services and air cargo services.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 42.6 25.1 32.3
Value Added (in % of GDP) 18.3 23.2 49.3
Value Added (Annual % Change) 3.0 -8.2 -8.1

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 36.5% of the country's GDP. The country mainly exports petroleum oils (9.5%), medicaments (6%), diamonds (5.5%), rice (2.9%), and articles of jewellery (2.8%), while it imports petroleum oils (17.5%), gold (6%), diamonds (4.3%), coal and similar solid fuels (4.3%), petroleum gas and other gaseous hydrocarbons (4.1%). According to IMF Foreign Trade Forecasts, the volume of exports of goods and services increased by 6.7% in 2021 and is expected to remain stable at 6.1% in 2022, while the volume of imports of goods and services increased by 7.5% in 2021 and is expected to increase by 8.2% in 2022.

India's main partners are the United States, China, the United Arab Emirates, Saudi Arabia, Iraq, Hong Kong, and Singapore. The country has recently signed free trade agreements with South Korea and ASEAN, and has entered into negotiations with several partners (EU, MERCOSUR, Australia, New Zealand and South Africa). In 2021, Brazil and India signaled their interest in expanding the FTA that India has with MERCOSUR, but the expansion is still under negotiation, pending approval from other members of the South American bloc. India is currently the world’s fastest-growing large economy, as well as the world's eighth largest exporter and tenth largest importer of commercial services. However, India’s trade regime and regulatory environment still remains relatively restrictive.

The country's trade balance is structurally negative, given that the country imports nearly 80% of its energy needs. However, as India benefits from the fluctuations in world hydrocarbon prices for its imports, the country's trade deficit has been oscillating for the past few years. In 2020, India exported USD 279 billion worth of goods, while imports accounted for USD 372 billion, resulting in a negative trade balance of USD 95 billion. According to the WTO, in the same year, exports of services amounted to USD 202 billion, whereas the imports of services stood at USD 152 billion, leading to a decrease of the overall trade deficit, which amounted to USD 8.2 billion.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 359,065449,925514,464486,059372,854
Exports of Goods (million USD) 264,020299,241324,778324,340276,302
Imports of Services (million USD) 133,710153,960174,925178,322152,860
Exports of Services (million USD) 161,845184,673204,323214,128202,600

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

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 40.140.743.639.436.5
Trade Balance (million USD) -107,476-148,134-186,692-157,678-95,246
Trade Balance (Including Service) (million USD) -41,579-72,212-105,918-73,452-8,223
Imports of Goods and Services (Annual % Change) 4.417.48.6-0.8-17.6
Exports of Goods and Services (Annual % Change) 5.04.612.3-3.3-8.1
Imports of Goods and Services (in % of GDP) 20.922.023.721.018.4
Exports of Goods and Services (in % of GDP) 19.218.819.918.418.1

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 6.76.16.26.26.2
Volume of imports of goods and services (Annual % change) 7.68.28.28.28.2

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)
2020
United States 17.9%
China 6.9%
United Arab Emirates 6.5%
Hong Kong SAR, China 3.5%
Singapore 3.0%
See More Countries 62.2%
Main Suppliers
(% of Imports)
2020
China 16.0%
United States 7.2%
United Arab Emirates 6.5%
Saudi Arabia 4.8%
Hong Kong SAR, China 4.0%
See More Countries 61.5%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Ram Nath Kovind (since 25 July 2017) - BJP
Vice President: M. Venkaiah Naidu (since 11 August 2017) - BJP
Prime Minister: Narendra Modi (since 26 May 2014) – BJP
Next Election Dates
Presidential: July 2022
Legislative: April-May 2024
Current Political Context
In May 2019, Indian Prime Minister Narendra Modi was re-elected with a broad mandate for a second five-year term, and the ruling coalition is expected to stay in power until the end of its term, in 2024. Modi’s second mandate focuses on job creation, the liberalisation of the economy, and infrastructure investment, while also tackling corruption and promoting Hindu nationalism. Modi's nationalist agenda, however, has dampened foreign investors, who are keen on secular policies. In 2021, India began its two-year tenure as a non-permanent member of the UNSC, marking the eighth time the country has set on the council. Furthermore, 2021 saw a year of mass protests by Indian farmers against controversial agricultural reforms. The government was supposed to introduce three laws that loosened rules around the sale, pricing and storage of farm produce - rules which have protected farmers from the free market for decades. However, as a result of the protests, Modi repealed the agricultural reform. Furthermore, India is still opposed to joining the RCEP, mostly in order to protect local farmers and industrial interests, which could lead the country to lose market shares in the world’s largest trading bloc. Still, India has been seeking to resume trade agreement negotiations with the EU and the U.S. (10.7%), which have been interrupted since 2013.
Main Political Parties
- 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 eight years;
- Indian National Congress (INC): centre to centre-left, big tent party, social democratic, secular; a major party involved in the independence movement; heads the United Progressive Alliance (UPA) opposition coalition;
- Bahujan Samaj Party (BSP): centre-left, social equality. India's third major political party, whose electorate is mainly composed of Dalits and low castes.

Other notable parties:
- All India Trinamool Congress (AITC): centre to centre-right, Bengali nationalist, populist
- Dravida Munnetra Kazhagam (DMK): centre-left, social democratic, regionalist
- Biju Janata Dal (BJD): centre to centre-left, social democratic, liberal, populist
- Shiv Sena (SS): far-right, Hindu nationalism, conservative, populist
- Telugu Desam Party (TDP): centre-right, neoliberal, populist, regionalist
- Telegana Rashtra Samithi (TRS): centre-right, regionalist, conservative
- 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

Executive Power
The President is the Chief of State and the Commander-in-Chief of the Armed Forces. 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.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in India, please consult the official data on the governmental platform #IndiaFightsCorona, which provides a breakdown by state at the section COVID19 Statewise Status.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in India and the current sanitary measures in vigour, please consult the dedicated pages on the official governmental portal mygov.in/covid-19, including the up-to-date information on the containment measures put in place and public health recommendations. Further details and updates can be found on the inter-ministerial website covid19.india.gov.in and on the website of the Ministry of Health and Family Welfare.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Central Board of Indirect Taxes and Customs.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to India on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the Indian government to address the impact of the COVID-19 pandemic, refer to the official portal covid19.india.gov.in.
For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Indian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to India in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Indian government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the Invest India’s website Business Immunity Platform.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
For the up-to-date information on possible support plans for exporters in India, if applicable, please consult the website of the Ministry of Commerce and Industry. Furthermore, the Business Immunity Platform outlines programs that may help many export businesses.
 

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