India: Economic and Political 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 | 2023 | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
| GDP (billions USD) | 3,567.55 | 3,889.13 | 4,271.92 | 4,710.37 | 5,193.51 |
| GDP (Constant Prices, Annual % Change) | 8.2 | 7.0 | 6.5 | 6.5 | 6.5 |
| GDP per Capita (USD) | 2,497 | 2,698 | 2,937 | 3,210 | 3,510 |
| General Government Balance (in % of GDP) | -8.3 | -7.8 | -7.6 | -7.4 | -7.1 |
| General Government Gross Debt (in % of GDP) | 83.0 | 83.1 | 82.6 | 81.8 | 80.8 |
| Inflation Rate (%) | 5.4 | 4.4 | 4.1 | 4.1 | 4.0 |
| 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
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. 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: March 2025
