The economy of India is characterized as a developing market economy. It is the world’s fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). According to the IMF, on a per capita income basis, India ranked 142nd by GDP (nominal) and 119th by GDP (PPP) per capita in 2018. Post 1991 economic liberalisation, the free market oriented reforms propelled India to achieve 6% to 7% annual average GDP growth. From 2014 to 2019, India’s economy was the world’s fastest growing major economy, surpassing China.
The long-term growth perspective of the Indian economy remains positive due to its young population and corresponding low dependency ratio, healthy savings and investment rates, and is increasing integration into the global economy. Despite previous reforms, economic growth is still significantly slowed by bureaucracy, poor infrastructure, policy uncertainty, agricultural mismanagement, inflexible labor laws, and complex land acquisition process.
The economy slowed in 2017, due to shocks of “demonetizaton” in 2016 and introduction of Goods and Services Tax in 2017. Nearly 60% of India’s GDP is driven by domestic private consumption and continues to remain the world’s sixth-largest consumer market. Apart from private consumption, India’s GDP is also fueled by government spending, investment and exports. In 2018, India was the world’s tenth-largest importer and the nineteenth-largest exporter. India has been a member of World Trade Organization since 1 January 1995. It ranks 77th on Ease of doing business index and 58th on Global Competitiveness Report. With 510-million-workers, the Indian labour force is the world’s second-largest as of 2018.
India’s largest trading partners are China, USA, UAE, Saudi Arabia, Switzerland, Germany, Hong Kong, Indonesia, South Korea, and Malaysia. In 2018-19, the foreign direct investment (FDI) in India was $64.4 billion with service sector, computer, and telecom industry remains leading sectors for FDI inflows. India has free trade agreements with several nations, including ASEAN, SAFTA, Mercosur, South Korea, Japan and few others which are in effect or under negotiating stage.
The service sector makes up 55.6% of GDP and remains the fastest growing sector, while the industrial sector and the agricultural sector employs majority of the labor force. The Bombay Stock Exchange and National Stock Exchange are one of the world’s largest stock exchanges by market capitalization. India is the world’s sixth-largest manufacturer, representing 3% of global manufacturing output and employs over 57 million people. It has the world’s eighth-largest foreign-exchange reserves worth $430 billion. India has a high national debt with 70% of GDP, while its fiscal deficit remained at 3.4% of GDP. India’s government-owned banks faced mounting bad debt, resulting in low credit growth, simultaneously the NBFC sector has been engulfed in a liquidity crisis.
The Indian textiles industry is estimated at $150 billion and contributes 7% of industrial output and 2% of India’s GDP while employs over 45 million people directly. The Indian IT industry is a major exporter of IT services with $180 billion in revenue and employs over four million people. India’s telecommunication industry is the world’s second largest by number of mobile phone, smartphone, and internet users. It is the world’s tenth-largest oil producer and the third-largest oil consumer.
The Indian automobile industry is the world’s fourth largest by production. It has $672 billion worth of retail market which contributes over 10% of India’s GDP and has one of world’s fastest growing e-commerce markets. India has the world’s fourth-largest natural resources, with mining sector contributes 11% of the country’s industrial GDP and 2.5% of total GDP. It is also the world’s second-largest coal producer, the second-largest steel producer and the third-largest electricity producer.