India flag India: Economic and Political Overview

The economic context of India

Economic Indicators

India is the world’s fifth-largest economy. After experiencing robust performance in 2022 (+7.2%), real GDP growth was expected to decelerate to 6.3% in 2023 and 2024-25 due to adverse weather-related events and a deteriorating international outlook (IMF). The beginning of FY 2023-24 witnessed robust growth propelled by public investment and private consumption. Nonetheless, the global economic slowdown has adversely affected merchandise trade. The risks are tilted to the downside: while indicators indicate that India's growth remains stable at present, there are significant challenges arising from increased global uncertainty. Moreover, the delayed effects of domestic policy tightening persist, alongside disappointing trends in certain socio-economic indicators, such as consumer goods sales, particularly in rural areas.

Concerning public finances, according to data from the Controller General of Accounts (CGA), the government's fiscal deficit reached INR 9.06 lakh crore, accounting for 50.7% of the full-year budget estimate. In absolute terms, the fiscal deficit amounted to INR 9,06,584 crore during the April-October period of 2023-24. In comparison, during the corresponding period last year, the deficit stood at 58.9% of the budget estimates of 2022-23. For 2024, the IMF forecasts a budget deficit of 8.5%, with a reduction to 8% by 2025. Meanwhile, the debt-to-GDP ratio increased marginally to 81.9% in 2023 and is expected to further increase to 82.2% by 2025 (IMF). The tightening of monetary policy has effectively addressed inflationary pressures, albeit at the cost of dampening household consumption and corporate investment. Headline inflation eased in the first half of 2023, falling below the upper threshold of the central bank’s 2-6% target range by September. However, food and energy prices continue to be susceptible to weather conditions and geopolitical tensions. For the year as a whole, the IMF estimated an inflation rate of 5.5%, with a decrease expected over the forecast horizon (4.6% this year and 4.1% in 2025).

In April 2023, India overtook China’s mainland as the world’s most populous country. Moreover, India 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 9,183 in 2023, PPP), 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). The country's inequalities are very strong: the richest 1% of the population own more than half 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, the unemployment rate in India, among persons aged 15 years and above, fell to 8.7% in December 2023 from 8.9% in the previous month. Although the unemployment rate eased in December, it remained at fairly high levels.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 3,353.473,572.083,937.014,339.834,789.83
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 2,3662,5002,7312,9843,265
General Government Balance (in % of GDP) -9.3-8.7-7.9-7.7-7.3
General Government Gross Debt (in % of GDP) 81.782.782.581.880.9
Inflation Rate (%)
Current Account (billions USD) -66.97-43.07-55.12-69.20-86.24
Current Account (in % of GDP) -2.0-1.2-1.4-1.6-1.8

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

India is the world's fourth agricultural power. As a central pillar of the Indian economy, agriculture contributes 16.7% 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 is also the fifth-largest producer of cattle and sheep, 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. Food grain and horticulture production hit a record high in the July 2022 to June 2023 crop year: according to official data, final estimates for food grain output stood at a record 329.68 million tonnes, up 4% y-o-y and 30.8 million tonnes higher than the previous five years’ average. Meanwhile, the total production of rice in 2022-23 was estimated at a record 135.75 million tonnes (+4.8% y-o-y), while that of wheat stood at 110.55 million tonnes.

The industry sector employs 25% of the workforce and accounts for 25.7% of GDP (World Bank). Its main sectors include manufacturing, textiles, chemicals, automobiles, and pharmaceuticals, with manufacturing being a cornerstone of the national economy. 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. According to figures from Standard & Poor's, for the first five months of the 2023-24 fiscal year, industrial production rose by 6.1% year-on-year, while manufacturing output rose by 5.8%.

The services sector is the most dynamic part of the Indian economy. It contributes to almost half of GDP (48.4%), 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.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 44.0 25.3 30.7
Value Added (in % of GDP) 16.6 25.6 48.6
Value Added (Annual % Change) 3.3 3.6 9.4

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

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Latest Update: July 2024