20 Facts About Indian Economy
India, with a GDP of over $ 2.6 tn, is on its way to becoming the fifth largest economy in the world. Despite several hiccups in the global economic situation, India remained as the world’s fastest growing large economy - growing at a rate of 8.2% in the first quarter of 2018-19. The country’s steady growth can be attributed to factors such as a young working population, rising levels of education and skills and several development initiatives undertaken by the Government. India has become more competent in terms of doing business and attracting investments, and has seen a staggering jump in several global indices such as the Start-up Ecosystem Ranking (#17), Global Manufacturing Index (#30), Logistics Performance Index (#44), Global Innovation Index (#58), Global Competitiveness Index (#58), Ease of Doing Business Index (#77), etc. The article below captures some of the important facts and information about the Indian economy.
After China, India is the world’s second-most populated country - with the current population exceeding 1.3 bn. With just one-third of the land area of China, India’s population falls behind by only 47 mn. The country has a high population density of 450 persons per sq. km, which favours economies of scale and offers a vast and diverse consumer base. About 62.5% of India’s population falls in the working age group of 15-59 years.
India is the seventh-largest country in terms of land area, with an area of 2.9 mn sq. km. the total agricultural land is about 60.4%, of which 52.6% is arable. About 23.8% of the total land area is covered by forests. The country has a land frontier of 15,200 km and a coastline of 7,516 km.
India is defined by the Himalayan Range, the world’s largest mountain range, running from the country’s north to north-east. It has the Thar Desert and Rann of Kutch in the west, and the watershed region of the Indo-Gangetic Plain in the east. The Ganga, India’s largest river, flows through 11 states in the north before entering Bangladesh. Further, India is surrounded by the Arabian Sea and the Indian Ocean on the west and the south respectively - and the Bay of Bengal on the east.
India's retail price inflation rate rose year-on-year to 2.86% in March 2019, slightly above the market expectations of 2.8%. In March, the corresponding provisional inflation rates for rural and urban areas were 1.80% and 4.10% respectively, compared to 1.81% and 3.43% in February.
Inflation in India is measured using the Consumer Price Index (CPI), which measures the changes in the prices of 260 commodities and services at the retail level. The country shifted from Wholesale Price Index (WPI) to CPI in 2014, as the former does not account for the price of services as well as the bottlenecks between a wholesaler and a retailer.
The financial market in India is facilitated through the Securities and Exchange Board of India (SEBI)-registered stock exchanges, with National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) being the most common. NSE is the second-largest exchange globally by the number of trades in equity shares, while BSE is Asia’s first and currently fastest stock exchange. SEBI is the national regulatory body for the securities market.
There are more than 7,200 companies registered on NSE and BSE as of FY 2019. Corporates (including Public Sector Enterprises), high-net worth individuals and retail investors are the key drivers of investment in the country. India has a diverse financial sector, which is undergoing rapid expansion – due to the Government introducing several reforms to liberalise the market as well as schemes such as the ‘Credit Guarantee Fund Scheme’ and the ‘MUDRA Yojana’ to provide easy access to finance.
Growth in India’s Gross Value Added (GVA) was anticipated at 7% in 2018-19, vis-à-vis 6.5% in 2017-18. The GVA from agriculture, forestry and the fishing sector grew by 3.8%, while the growth from manufacturing was recorded at 8.3%. The GVA jumped to 9.4% and 8.9% for the utilities and construction sectors respectively, recording the highest jumps amongst sectors. The financial services sector recorded a 6.8% growth in GVA. India’s real GVA is expected to grow to 7.2% in 2019-20, according to the Reserve Bank of India.
In November 2016, the Government of India announced the demonetisation of INR 500 and INR 1,000 currency notes and the issuance of new INR 500 and INR 2,000 notes. The purpose of it was fourfold - to eradicate counterfeit notes; curb black money and the use of money in illegal activities like human trafficking and terrorism; fight tax evasion and bring financial transactions under the digital radar. The decision was met with mixed initial reactions, and saw a decrease in the growth rate of the GDP - making it the lowest since March 2014. However, the bold action by the Government eventually benefited the economy through increased digital transactions; rise in mutual fund and insurance investments and an increase in income-tax returns filed - from 38 mn in 2014 to 68.6 mn in 2018 - giving income tax officials the ability to track suspicious transactions.
Key sectors that are driving growth in the Indian economy include – construction, financial services, technology, automotive and healthcare. With the launch of the ‘Make in India’ initiative, the country has seen a spur in infrastructure development, with growth of 5.6% expected in the sector between 2016-20. Growth in India’s financial services sector is driven by rising incomes and awareness, with India’s asset management industry reaching $ 321 bn in February 2019, and becoming one of the fastest growing globally. India has the world’s second-largest internet subscriber base, and is the third-largest tech startup hub. Its domestic tech-market is the fastest growing in the Asia-Pacific region. India’s automobile sector is expected grow at a CAGR of 15% to reach $ 300 bn by 2026, and become the third-largest automotive market in terms of volume. The healthcare sector in India is expected to grow at a CAGR of 22.9% to reach $ 372 bn by 2022.
During 2017-18, India’s exports and imports stood at $ 303.5 bn and $ 465.6 bn respectively. Major items of export for India include precious metals and stones, mineral fuels and auto components; while major import items include mineral fuels, precious metals and stones and electrical machinery.
EXIM procedures in India have been laid down in the Foreign Trade Policy (FTP) 2015-20, with an aim to enhance trade to propel economic growth and generate employment. The Customs Tariff Act and Central Excise Tariff Act have laid down the duties that are levied on trade. The Directorate General of Foreign Trade (DGFT) is the body that promotes and facilitates foreign trade, implements FTP and issues authorisation to exporters.
India’s top five export partners in 2017-18 included the United States (15.7%), UAE (9.3%), Hong Kong (4.8%), China (4.4%) and Singapore (3.4%). The country’s exports to China have seen the highest growth - over 31% from the previous year. Region-wise, India primarily exports to North America (17.8%), the European Union (17.7%) and the North-East Asian Countries (13%).
Top countries investing in India through FDI equity inflows during 2000-18 included Mauritius, Singapore, Japan, United Kingdom and the Netherlands. These countries have invested $ 132.4 bn (32%), $ 79.7 bn (19%), $ 29.5 bn (7%), $ 26.5 bn (6.5%) and $ 26.4 bn (6.5%) respectively during this period.
Sectors in India that attracted the highest FDI equity inflows between 2000-18 included the services sector (financial services, banking, insurance, testing and analysis, etc.), computer software and hardware, telecom, construction development (including townships, housing, etc.) and trading. These sectors have garnered $ 71.6 bn (17%), $ 35.8 bn (9%), $ 32.5 bn (8%), $ 24.9 bn (6%) and $ 21.6 bn (5%) worth of investments, respectively. For more information, read more about FDI in India.
India’s per capita GDP (current price) stood at $ 1,979.4 in 2017, growing over 36% in the last five years. The per capita GDP at purchasing power parity (current price) was $ 7,166.2 during the same period.
The employment rate in India was recorded at 93.1% during 2018, with the agricultural sector being the largest employer - employing more than 42.7% of the workforce. The services sector employed 33.5%, while the manufacturing sector employed 23.8% of the workforce.
Top five sectors in terms of employment generation in India as of 2017 were:
India is the world’s largest consumer of gold and has the 10th largest gold reserves globally. The gold holdings of the country jumped from 598.6 tonnes in the last quarter of 2018 to an all-time high of 607 tonnes in the first quarter of 2019 - as per the latest report by the World Gold Council. Over 80% of the jewellery market in India is dominated by gold jewellery.
Foreign exchange reserves in India accounted for $ 418.5 bn as of April 2019. With a jump in foreign exchange reserves, foreign currency assets reached $ 390.4 bn, while gold assets reached $ 23.3 bn. Reserves in India averaged $ 221.8 mn between 1998 to 2019. Foreign exchange reserves in India include foreign currency assets, gold assets, special drawing rights and reserve tranche position.
International tourist arrivals in India were recorded at 15.54 mn in 2017, with an annual growth rate of 6.7%. India accounted for about 4.8% of the total international tourist arrivals globally, the highest in South Asia. The country generated $ 27.4 bn from international tourism receipts in 2017, accounting for 7% of the total revenue generated from tourism globally.
Government of India launched the ‘Make in India’ initiative with an aim to support the country’s manufacturing sector and elevate its contribution to the GDP - from the current 17%, to 25% by 2022. The scheme has attracted new entrants such as Kia and MG Motors. Notably, the construction sector has seen a steep rise in FDI through government initiatives such as the Bharatmala and Sagarmala Programmes and the Smart Cities Mission.
The Government of India also launched the India Investment Grid (IIG) as an initiative that aims to showcase a menu of investment options across India on a single interactive platform, thus connecting potential investors to project promoters.
The tax structure in India is divided into direct and indirect taxes - levied on the taxable income earned by individuals and on the sale and provision of goods and services respectively. Taxes are levied by both the Central and the State Governments. Some minor taxes are also levied by local authorities, including municipal bodies. Some common direct taxes include income tax, stamp duty and registration. Indirect taxes include customs duty, central GST, central excise and VAT.
The Government of India passed an Amendment in August 2016 to roll out the Goods and Services Tax (GST) - simplifying the complex multiple indirect tax structure. The GST rate structure has been implemented under five slabs:
Public transport is the primary mode of transport in India, with railways and roads being the dominant carriers. Road transport carried 90% of total passenger traffic and 67% of freight traffic in 2016. The total number of registered vehicles on road as of 2016 was over 230 mn, with two-wheelers holding the highest share of this number - 73.5%. The number of registered vehicles grew at a CAGR of 9.9% - with cars, jeeps and taxis recording the highest CAGR - 10.1%. Further, railway transport carried 8,116 mn passengers and 1,110.9 MT of freight during 2016-17.
Air transport was used to carry 253 mn domestic passengers and 1.25 mn tonnes of domestic freight in 2018-19.
India currently has 77 cargo-handling major and non-major ports, 86 international and domestic airports and over 5.5 mn km of road network. The country ranked 44th in the 167 country Logistics Performance Index issued by the World Bank in 2018. India has witnessed substantial growth in infrastructure spending over the past few years, with a budgetary allocation of over $ 83 bn for the fiscal year 2018-19. Initiatives such as ‘Bharatmala Pariyojana’, ‘Sagarmala Project’, ‘Smart Cities Mission’ and ‘Housing for All’ are contributing to the growth of opportunities in the infrastructure sector.
The construction sector (development and related activities) attracted FDI worth $ 3.3 bn in 2017-18. The sector requires an investment of $ 777.7 bn by 2022 for ensuring sustainable infrastructure development.