About Us Overview of Indian Economy

OVERVIEW OF INDIAN ECONOMY

 

With a population of more than 1.3 billion, India is the world’s largest democracy and the world’s third-largest economy in purchasing power parity terms. Over the past decade with the country’s integration into the global economy, accompanied by steady economic growth, India has now emerged as one of the important global player and the fastest growing major economy in the world.

India’s nominal GDP at current prices was estimated at Rs. 232.15 trillion (US$ 3.12 trillion) in FY22. With more than 100 unicorns valued at US$ 332.7 billion, India has the third-largest unicorn base in the world. The government is also focusing on renewable sources to generate energy, and is planning to achieve 40% of its energy from non-fossil sources by 2030.

Strong economic growth in the first quarter of FY 2022-23 helped India overcome the UK to become the fifth-largest economy after it recovered from repeated waves of COVID-19 pandemic shock. Real GDP in the first quarter of 2022–23 is currently about 4% higher than its corresponding 2019-20, indicating a strong start for India's recovery from the pandemic. Given the release of pent-up demand and the widespread vaccination coverage, the contact-intensive services sector will probably be the main driver of development in 2022–2023. Rising employment and substantially increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.1

 

MACRO INDICATORS

Strong economic growth in the first quarter of FY 2022-23 helped India overcome the UK to become the fifth-largest economy after it recovered from repeated waves of COVID-19 pandemic shock. Real GDP in the first quarter of 2022–23 is currently about 4% higher than its corresponding 2019-20, indicating a strong start for India's recovery from the pandemic. Given the release of pent-up demand and the widespread vaccination coverage, the contact-intensive services sector will probably be the main driver of development in 2022–2023. Rising employment and substantially increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

In September 2022, the following key frequency indicators highlighted improved performances:

Key Economic Indicators for India

S.No.

Indicator

Value

1.     

Overall exports3

US$ 311.82 billion in April-August 2022

(a 19.72% YoY increase)

2.     

Overall imports3

US$ 390.91 billion in April-August 2022

(a 43.78% YoY increase).

3.     

GDP at Current Prices2

US$ 815.61 billion (in Q1 2022-23)

4.     

India’s outward foreign direct investment (OFDI)3

US$ 1.03 billion (August 2022)

5.     

India’s Consumer Price Index (CPI)3

7% (August 2022)

6.     

Manufacturing Purchasing Managers’ Index (PMI)1

49,3 (August 2022)

7.     

IIP (Index of Industrial Production)3

134.6 (July 2022)

8.     

Traffic handled at major ports1

322,645 thousand tonnes (April-August 2022)

9.     

Gross Goods and Services Tax (GST) revenue collection

US$ 17.65 billion (August 2022)

10.  

Merchandise exports4

US$ 29.78 billion (October 2022)

11.  

Merchandise imports4

US$ 56.69 billion (October 2022)

12.  

Estimated value of services export4

USD 28.58 billion (October 2022)

13.  

Estimated value of services import 4

USD 16.30 billion (October 2022)

14.  

Merchandise and service exports India’s overall exports4

US$ 58.36 billion (October 2022)

15.  

Real GDP growth5

6.8%

16.  

Inflation rate5

6.9%

17.  

Foreign direct investment3

US$ 58.77 billion (FY 2021-22)

18.   

Foreign exchange reserves3

US$ 537.52 billion (September 2022)

 

Foreign Direct Investments (FDI)

India ranked 68th in the Global Competitive Index; the economy showed significant resilience during the pandemic. India was also named as the 48th most innovative country among the top 50 countries.6

Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges like tax exemptions, etc. For a country where foreign investment is being made, it also means achieving technical know-how and generating employment. The Indian Government’s favourable policy regime and robust business environment has ensured that foreign capital keeps flowing into the country. The Government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others.

According to the World Investment Report 2022, India was ranked eighth among the world's major FDI recipients in 2020, up from ninth in 2019. Information and technology, telecommunication and automobile were the major receivers of FDI in FY22.

From April 2021-March 2022, India's computer software and hardware industry attracted the highest FDI equity inflow amounting to US$ 14.46 billion, followed by the automobile industry at US$ 6.99 billion, trading at US$ 4.53 billion and construction activities at US$ 3.37 billion. India also had major FDI flows coming from Singapore at US$ 15.87 billion, followed by the US (US$ 10.54 billion), Mauritius (US$ 9.39 billion) and the Netherlands (US$ 4.62 billion). The state that received the highest FDI during this period was Karnataka at US$ 22.07 billion, followed by Maharashtra (US$ 15.43 billion), Delhi (US$ 8.18 billion), Gujarat (US$ 2.70 billion) and Haryana (US$ 2.79 billion).6

Foreign Direct Investment (FDI) in India

  1. The Government of India increased FDI in the defence sector by increasing it to 74% through the automatic route and 100% through the government route.
  2. The government is likely to introduce at least three policies as part of the Space Activity Bill in 2022. This bill is expected to clearly define the scope of FDI in the Indian space sector.
  3. By February 2022, the Union Cabinet allowed 20% FDI for the Life Insurance Corporation of India (LIC).7
  4. The government has amended rules of the Foreign Exchange Management Act (FEMA), allowing up to 20% FDI in insurance company LIC through the automatic route.
  5. The FDI in India's renewable energy sector stood at US$ 1.03 billion for the first half of FY2021-22.
  6. In 2021, India received R&D investments of Rs. 343.64 million (US$ 4.35 million); this was 516% higher compared to the previous calendar year.
  7. In May 2022, India received FDI investments of Rs. 494 crore (US$ 61.91 million) in the defence manufacturing sector.

 

India ranked 37th for the year 2022 (on 43rd place in 2021) on the Institute for Management Development (IMD)’s annual World Competitiveness Index 2022. 8

 

INVEST IN INDIA

India is one of the world's fastest-growing economies, with largest youth population in the world, and world-class infrastructure across the country. India, one of the fastest growing economies, offers a numerous investment opportunities across various sectors:

  1. Agriculture & Forestry: India is the largest producer as well as the largest exporter of cereal products in the world. India's export of cereals stood at $12.87 bn during the year 2021-22. Rice (including Basmati and Non-Basmati) occupy the major share in India's total cereals export with 75% (in value terms) during the same period.9
  2. Healthcare industry in India comprises of hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. Healthcare sector in India is expected to grow to reach a size of $50 bn by 2025.10
  3. Pharmaceuticals: India is the largest provider of generic medicines globally, occupying a 20% share in global supply by volume, and also supplies 62% of global demand for vaccines.The pharmaceutical industry in India offers 60,000 generic brands across 60 therapeutic categories. Major segments include generic drugs, OTC Medicines, API/Bulk Drugs, Vaccines, Contract Research & Manufacturing, Biosimilars and Biologics.11
  4. IT&BPM: India is one of the most preferred destinations when it comes to setting up Global Capability Centres (GCCs). In FY21, more than 1,400+ GCCs have more than 2,300 GCC units in India, employing more than 1.38 mn professionals. Over 45 new data centres to come up in India by 2025.12
  5. Food Processing: India's food ecosystem offers huge opportunities for investments with stimulating growth in the food retail sector, favorable economic policies, and attractive fiscal incentives.13

***

Source:

 1 IBEF, India Brand Equity Foundation, https://www.ibef.org/economy/monthly-economic-report

2 IBEF, India Brand Equity Foundation, https://www.ibef.org/news/india-s-q1fy23-gdp-grows-13-5-fastest-in-a-year-govt-data

3 IBEF, https://www.ibef.org/economy/indiasnapshot/facts-about-indian-economy

4 Department of Commerce, Economic Division, https://commerce.gov.in/wp-content/uploads/2022/11/Press-Release-October-2022.pdf 

5 Internationally Monetary Fund, https://www.imf.org/en/Countries/IND 

6 IBEF, https://www.ibef.org/economy/foreign-direct-investment

7 IBEF, https://www.ibef.org/economy/foreign-institutional-investors

8 IMD World Competitiveness, https://worldcompetitiveness.imd.org/countryprofile/IN/wcy

9 Invest India, https://www.investindia.gov.in/sector/agriculture-forestry

10 Invest India, https://www.investindia.gov.in/sector/healthcare

11 Invest India, https://www.investindia.gov.in/sector/pharmaceuticals

12 Invest India, https://www.investindia.gov.in/sector/it-bpm

13 Invest India, https://www.investindia.gov.in/sector/food-processing