India: Economic and political outline

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 6.8% in 2022, mainly driven by the pickup in economic activities in the travel industry, trade, construction, mining, electricity, and manufacturing. One of the fastest-growing economies in the world, India is expected to keep growing in the coming years, with global off-shoring, digitisation, and energy transition setting the scene for unprecedented economic growth in the country. According to the IMF, the economy is expected to register an estimated GDP growth of 6.1% in 2023 and 6.8% in 2024.

Thanks to global trends and key investments made in technology and energy, India is on track to becoming one of the world's top economies. In 2022, the country continued recovering from the impacts of the pandemic, with India’s broad range of fiscal stimuli and health responses proving their effectiveness. By the end of the year, the country’s general government deficit stood at an estimated 8.5%, a rate which should remain relatively stable in 2023 and 2024, at 8.3% and 8.4/%, respectively. According to the IMF, inflation increased to 6.9% in 2022, but it is expected to decrease to 5.1% in 2023 and 4.4% in 2024. The level of public debt remains high - it was estimated at 83.4% in 2022 - and it is expected to remain virtually unchanged in the next two years, at 83.8% in 2023 and 84.1% in 2024. 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 8.3% of total labour force in 2022, with rates being higher in urban areas (10%) than in the rural parts of the country (7.4%).

Main Sectors of Industry

India is the world's fourth agricultural power. As a central pillar of the Indian economy, agriculture contributes 16.8% 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 2022, the sector recorded a sharp increase in investments and exports. Not only that, but agriculture has been a key sector in India’s economic recovery from the COVID-19 crisis as 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 25.9% 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. In 2022, despite supply constraints and raw material shortages, key sectors like construction, mining, electricity, and manufacturing benefited from a pickup in economic activity, with demands from everything from cement to steel significantly increasing.

The services sector is the most dynamic part of the Indian economy. It contributes to almost half of its GDP (47.5%), but it only employs 32.3% 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. In 2022, the sector continued showing a steady recovery, mainly driven by customer-facing services and the growing software sector.

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

56,5/100

World Rank:

121

Regional Rank:

26

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

Business environment ranking

Score:

5.74/10

World Rank:

58/82

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

Sources of General Economic Information

Ministries

Ministry of Agriculture
Ministry of Micro, Small and Medium Enterprises
Ministry of External Affairs

Statistical Office

Directorate General of Commercial Intelligence & Statistics

Central Bank

Reserve Bank of India

Stock Exchange

National Stock Exchange

Other Useful Resources

Ministry of Finance
Ministry of Corporate Affairs

Main Online Newspapers

The Times of India
Hindustan Times
Economic Times
The Hindu
Financial Express
Business Today
Dainik Bhaskar (in Hindi)
The Indian Express
The Telegraph
Business Standard

Economic Portals

Indian Trade Portal (Ministry of Commerce & Industry)
Business World
Business Standard

Political Outline

Current Political Leaders

President: Droupadi Murmu (since 25 July 2022) - BJP
Vice President: Jagdeep Dhankhar (since 11 August 2022) - BJP
Prime Minister: Narendra Modi (since 26 May 2014) – BJP

Next Election Dates

Presidential: July 2027
Legislative: April-May 2024

Current Political Context

Re-elected with a broad mandate for a second five-year term in May 2019, Indian Prime Minister Narendra Modi and the ruling coalition are expected to stay in power until the end of the 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, in 2022, Indians went to the ballots to vote on both Presidential and state legislative elections. With 64.03% of the votes, BJP candidate, Droupadi Murmu, was elected the new president of India. Droupadi Murmu is the first person belonging to the tribal community and also the second woman to hold the office, as well as the youngest person to occupy the post. Furthermore, the former Governor of West Bengal and BJP candidate, Jagdeep Dhankhar, was elected vice-president with 74.37% of the votes. The year also say by-elections to the Lok Sabha, elections to the Rajya Sabha, to state legislative assemblies and numerous other elections and by-elections to state legislative councils and local bodies.

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
-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

Type of State

India is a federal republic state based on parliamentary democracy.

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.

Indicator of Freedom of the Press

World Rank:

142/180

Indicator of Political Freedom

Ranking:

Free

Political Freedom:

2/7

Civil Liberties:

4/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic)underundertaken by the government of India, please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, 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.