Over the past several years, the Indian economy has emerged as one of the fastest-growing economies globally. India is expected to overtake the UK, Germany, and Japan and become the third-largest economy in the world in the next 10 to 15 years due to the steady flow of investments into the country.
India ranked fifth in 2019, based on the nominal gross domestic product (GDP) as per the World Bank with $2.86 tn. However, the impact of the coronavirus pandemic pushed it down to sixth, after only posting a nominal GDP of $2.6 tn in 2020.
India GDP Annual Growth Rate (in %)
The International Monetary Fund (IMF) expects the Indian economy to remain at this spot with a nominal GDP of $2.72 trillion in 2021.
Aside from its emergence as one of the world’s top economies, India is also the fourth largest unicorn base (start-ups valued with at least one billion USD). The Hurun Global Unicorn List counts more than 21 unicorns with a total value of $73.2 bn. A Nasscom-Zinnov report forecasts the Indian economy to have around 100 unicorns by 2025, which will create about 11 million direct jobs.
To boost productivity and economic growth, the McKinsey Global Institute says the country needs to raise its rate of employment growth and create 90 million non-farm jobs between 2023 and 2030 to achieve a GDP growth of between 8% to 8.5% during the period.
India is also the second most populated nation globally after China with over 1.38 billion based on November 2020 estimates. It is expected to take the top spot by 2024 and reach 1.5 billion by 2030.
Currency and Central bank
The country’s official currency is the Indian rupee, which is subdivided into 100 paise. But as of 2019, the 1-rupee coin is the lowest value coin that remains in use. The Reserve Bank of India (RBI) serves as the central bank and the currency regulatory body under the Ministry of Finance.
The central monetary authority aims to achieve price stability, control the expansion of bank credit, promote fixed investments, restrict inventories and stocks, increase the efficiency in the country’s financial system, introduce flexibility and provide significant autonomy in financial operations.
India Inflation (in %)
RBI has decided to maintain record low-interest rates despite concerns about inflation. The central bank last cut its repo rate in May 2020 and has been keeping an accommodative monetary policy stance to help boost growth and help India’s economic recovery from the effects of the Covid-19 pandemic.
Industry and Trade
India’s economy may be subdivided into the three sectors of agriculture, industry, and services. India was historically an agricultural country, with over 50% of its GDP coming from the sector in the 1950s. However, it has fallen over the decades, services have emerged as the top sector.
Agriculture in India contributed around 17% to 18% of the country’s GDP while employing more than 50% of its total workforce. The top five agricultural products based on total value are rice, buffalo milk, cow milk, wheat, and cotton.
Meanwhile, the manufacturing and industry sectors account for 26% of India’s GDP and provide work to 22% of the workforce. The pharma industry in India has expanded dramatically in the past few years and currently holds 20% of the global generic drug supply in terms of volume. The country is also a major producer of textiles and apparel, as well as pulp and paper.
India currently ranks 15th globally in total exports. Its top export products are refined petroleum, diamonds, packaged medicaments, jewellery, and automobiles. The US, United Arab Emirates, China, Hong Kong, and Singapore are its top export partners.
India Balance of Trade
The country ranks 11th in the world in total imports, with crude petroleum, gold, coal briquettes, diamonds, and petroleum gas as its main import products. India’s top import partners are China, the US, United Arab Emirates, Saudi Arabia, and Iraq.
Survey and Rankings
In the Heritage Foundation’s 2021 Index of Economic Freedom, India improved from 129th place to 121st globally and from 31st to 26th among Asia-Pacific countries. However, the country remains in the mostly unfree category.
Meanwhile, the Indian economy maintained its position in the World Bank’s Ease of Doing Business at 63rd among 190 countries with a score of 71.0.
Stock Exchanges and Capital Markets
India has two major stock exchanges where most trading occurs, namely the Bombay Stock Exchange (BSE) and the National Stock Exchange of India Limited (NSE). The BSE was established in 1875 and is considered Asia’s oldest stock exchange, while the NSE was established in 1992. Still, both exchanges follow the same trading mechanism, trading hours, and settlement process.
The major indices used to measure the Indian stock market’s performance are the S&P Bombay Stock Exchange Sensitive Index or BSE SENSEX, a free-float market-weighted index of 30 companies on the BSE, and the NIFTY 50, which examines the weighted average of 50 of the largest Indian companies on the NSE.
Government Bonds in India are primarily issued for periods ranging from 5 to 40 years. There are multiple variants, including Treasury Bills, Special Gol securities and State Development Loans (SOLs).
On the other hand, corporate bonds may come in the form of Convertible Bonds, Non-Convertible Debentures (NCDs), Perpetual, Zero Coupon Bonds, Masala bonds, External Commercial Borrowings (ECBs), and Foreign Currency Denominated Bonds (FCBs).
According to a Bloomberg survey, bond yields in India are expected to increase by the end of 2021 as the RBI’s rate-setting panel encounter disagreements, indicating a shift toward a more hawkish stance.
Survey results forecast the benchmark 10-year yield to go up to 6.40% by December while the five-year yield is projected to climb by 5.90%.
Real Estate Market
The Department for Promotion of Industry and Internal Trade Policy (DPIIT) released data indicating that construction has been the third-largest sector in terms of foreign direct investments (FDI) inflow. From April 2020 to March 2021, the total FDI in the sector was at $50.8 bn.
The central government plans to construct 20 million units of affordable housing in urban areas by 2022, boosting the residential sector significantly. The government has also allowed foreign direct investments (FDIs) with up to 100% ownership for settlements development projects and townships.
India’s real estate sector is forecast to amount to $650 bn by 2025, representing 13% of its GDP and to reach a market size of $1 tn by 2030.
India Housing Index (in %)
Source of charts: tradingeconomics.com