India: Economic and Political 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 Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 2,671.60 | 3,150.31 | 3,386.40 | 3,736.88 | 4,062.15 |
| GDP (Constant Prices, Annual % Change) | -5.8 | 9.1 | 6.8 | 5.9 | 6.3 |
| GDP per Capita (USD) | 1,913 | 2,234 | 2,379 | 2,601 | 2,803 |
| General Government Balance (in % of GDP) | -9.1 | -8.8 | -9.6 | -8.9 | -8.3 |
| General Government Gross Debt (in % of GDP) | 88.5 | 84.7 | 83.1 | 83.2 | 83.7 |
| Inflation Rate (%) | 6.2 | 5.5 | 6.7 | 4.9 | 4.4 |
| Current Account (billions USD) | 24.01 | -38.69 | -88.43 | -81.59 | -89.29 |
| Current Account (in % of GDP) | 0.9 | -1.2 | -2.6 | -2.2 | -2.2 |
Source: IMF – World Economic Outlook Database, October 2021
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.
| 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) | 16.8 | 25.9 | 47.5 |
| Value Added (Annual % Change) | 3.0 | 10.3 | 8.4 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: September 2023
