Coface Group


Population 1.3 billion
GDP per capita 1,608 US$
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major macro economic indicators

  2013/14 2014/15 2015/16(f) 2016/17(f)
GDP growth* (%) 6.6 7.2 7.3 7.5
Inflation (yearly average) (%) 10.0 5.9 5.4 5.5
Budget balance** (% GDP) -7.6 -7.0 -7.2 -7.0
Current account balance (% GDP) -2.6 -1.3 -1.3 -1.4
Public debt** (% GDP) 65.8 66.1 65.3 63.9


(e) Estimated  (f) Forecast

*Take into consideration changes in GDP calculation method introduced in February 2015

** Includes federal public debt and debt for local authorities

Fiscal year: April – March 


  • Diversified growth drivers
  • Sound fundamentals: high level of savings and investments
  • Effective private sector in services
  • Moderate external debt and satisfactory foreign exchange 


  • Lack of infrastructure and shortcomings in the education system
  • Cumbersome bureaucracy and persistent political deadlocks
  • Net importer of energy resources
  • Rising debt of private companies
  • Weak public finances
  • Persistent uncertainties over the Kashmir issue


Growth will remain vigorous but the reform process is running out of steam

Activity is likely to remain vigorous during the fiscal year 2016/17. The Indian economy will continue to benefit from the low level of commodity prices and the effects of the initial reforms Narenda Modi’s government has undertaken, aimed at promoting the Indian manufacturing sector, attracting FDI and reducing the constraints that are weighing on the economy.

Nevertheless, the flagship measures the prime minister has promised, such GST harmonisation at a federal level and an easing of rules relating to land acquisition, are blocked by the parliament. 

Household consumption, the main driving force of activity, will probably remain buoyant. It will benefit from an increase in wages paid to federal civil servants and the improvement in the financial integration of the lowest-income households. In addition, the accommodating monetary policy conducted by the RBI (the key interest rate has been lowered by 125 basis points in 2015) is bolstering private investment and the authorities have implemented an infrastructure development programme, particularly in the areas of roads, railways and electricity. Nevertheless, the budgetary constraints and the delays relating to the land reform are keeping these projects from moving ahead. Moreover, even though India is not very exposed to the slowdown in China, exports are likely to continue to suffer from a lack of competitiveness and from the sluggishness of global demand.

Nevertheless, the services sector will continue to underpin activity, especially the high-technology sector.

Inflation will remain under control in 2016, thanks in particular to the moroseness of commodity prices, first and foremost oil and gold, unless the monsoon has a direct impact on the quality of the harvests.


External accounts are under control, but public finances remain fragile

Despite the determination to consolidate public finances, the fiscal deficit and the public debt remain significant. Nevertheless, the spending on infrastructures the Modi government has planned would not be financed by borrowing, but by the sale of licences and privatisation of state-owned companies. Furthermore, the government is reallocating funds from the federal government to local governments, as decentralised public spending is more productive.

The current-account is expected to remain under control despite the slowdown in exports. The low level of commodity prices should make it possible to keep a lid on the value of imports.

Despite the US Federal Reserve’s monetary policy tightening, the rupee will probably remain relatively stable in 2016, as the current account deficit is limited and the foreign exchange reserves are comfortable (close to 8 months of imports in 2016). Also, FDI and portfolio investments are on an upward trend, driven by the easing of regulations.

Lastly, public-sector banks, which account for 75% of banking assets and finance unprofitable sectors, are seeing deterioration in the quality of their assets.


The reforms that Prime Minister Modi has promised will be difficult to implement

Following the general elections in May 2014 which gave a resounding victory to the BJP (Bharatiya Janata Party), Narenda Modi was appointed prime minister and his party holds the absolute majority in the lower house of parliament. Elections that have been held in several important states have confirmed the BJP’s popularity, but the party has had several electoral setbacks, notably in Delhi and in the state of Bihar. The National Congress party will continue to dominate the upper chamber, which could delay the reforms expected by the business community, which reacted very favourably to the election of Mr Modi.

Even though Mr Modi’s scorecard when he was chief minister of Gujarat was marred by violence in 2002 when thousands of Muslims were killed, his election was welcomed by India‘s partners. However, the relationships with Pakistan remain tense due to the Kashmir issue. Despite the fact that the Pakistani prime minister was present at Mr Modi’s inauguration, India suspended its diplomatic talks with Pakistan in August 2014 after the meeting between the Pakistani high commissioner in New Delhi and the Kashmir separatist leaders. Moreover, there has been lethal exchange of fire at the border between the two countries. A resumption of dialogue was nevertheless initiated in March 2015 thanks to the meeting between senior of foreign affairs officials. In July 2015, the two prime ministers met in Russia and Pakistan is putting pressure on India to get negotiations restarted.

However, despite the expected reforms, the business environment will continue to suffer from persistent shortcomings.


Last update : January 2016

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