Economic Overview: India

1st Feb, 2021

Historically, India has classified and tracked its economy and GDP in three sectors: agriculture, industry, and services. The country ranks second globally in food and agricultural production, while agricultural exports were $35.09 billion in 2019. India's definition of services sector includes its construction, retail, software, IT, communications, hospitality, infrastructure operations, education, healthcare, banking and insurance, and many other economic activities. Industry includes various manufacturing sub-sectors accounting for 26% of GDP and employs 22% of the total workforce.

Since the 2000s, India has made remarkable progress in reducing absolute poverty. By opening up several pathways for trickle-down, the government has ensured that the benefits of growth and macroeconomic stability reach the bottom of the pyramid. In recent years it has undertaken important reforms to spur economic growth - introducing the bankruptcy code, implementation of the GST to integrate the national market and undertook a series of reforms to ease the conduct of business.

Before the pandemic, however, the economy was decelerating. Real GDP growth had moderated from an average of 7.4 percent in FY16/19 to 4.2 percent in FY19/20 due to long-standing structural rigidities in key input markets; continuing balance sheet stress in the banking and corporate sector; a decline in rural demand; and a subdued global economy. Although the government initiated several policy actions to arrest the slowdown, the pandemic accentuated the down turn and real GDP contracted by an unprecedented 23.9 percent (year-on-year) in Q1 FY21.


Below is a break down of major economic indicators (2018 - 2020)

Economic Parameters 2018 2019

2020 (FQ)

GDP (Billion) 2,713 2,875 2,610
GDP Growth (%) 6.1 4.2 1.9
GNI (Per Capita) 2,010 2,130 -
FDI Net (USD billion)
-30.7 -37.5 -
Inflation Rate (%)
3.4 4.5 3.3
Unemployment Rate (%)
5.3 5.4 5.4
Balance of Trade (USD million) -105.9 -73.4 -
Exchange Rate USD/LC 68.3 70.4 73.5
Lending Interest Rate (%) 9.5 9.5 9.3
National Debt (USD Billion) 1,801 2,010 2,219
National Debt as % of GDP 68.1 69.0 68.5


GDP (Billion)

India has sustained growth of GDP for previous years due to the increasing share of investment and exports; stabilization of growth within each sector – agriculture, industry and services – and partly transition of the economy toward the services sector. In the year 2020, the GDP is expected to shrink due to the widespread lockdown resulting in contraction of each sector, where its output and income is falling.

GDP Growth (%)

India’s workforce is expanding in the industry and services sectors, growing partially because of
international outsourcing — a profitable venture for the Indian economy in previous years. However, due to COVID-19 situation three industries - agriculture, construction and automobiles - have been struck the hardest amid India's economic slowdown  

GNP (Per Capita)

India is a low middle-income country with a GNI per capita of around $2,000.

FDI Net (USD Billion)

Despite the negative short-term shocks from the pandemic, total foreign direct investment into India has remained buoyant. Foreign direct investment by technology firms in the first seven months of 2020 has already reached around USD 17 billion, boosted by the USD 10 billion new investment announced by Google in mid-July.

Inflation (%)

India’s inflation rate has been on the rise over the last decade. However, it has been projected that there will be a slight decrease in the inflation rate in year 2020 which implies that individual would need to spend less on the goods as compared to previous years.

Unemployment Rate (%)

According to Statista, In September 2020, India saw an unemployment rate of over six percent.
A damaging impact on an economy as large as India’s caused due a total lockdown was imminent. This was possibly a result of a decrease in demand as well as the disruption of workforce faced by companies. Social distancing resulted in the job losses, specifically those Indian society’s lower economic strata. Several households terminated domestic help services – essentially an unorganized monthly-paying job.
In a form of Aid, government has launched various programs and campaigns to help sustain these households. Under the Pradhan Mantri Garib Kalyan Yojana, 312 billion Indian rupees were accrued and provided to around 331 million beneficiaries that included women, construction workers, farmers, and senior citizens.

Balance of Trade (USD Millions)

The Net Trade in goods and services in India for the year 2018 & 2019 is negative because the country imports are far more than the exports. India’s main imports include chemicals, crude oil, and machinery, while India exports textiles, software, petroleum products, and leather goods. One reason for the increasing trade deficit is probably the price of crude oil and the rapid economic growth, which means that export trade now needs to catch up to the demand.

Exchange Rate USD/LC

The economic disruption due to the spread of the novel coronavirus disease (COVID-19) over the past few months has adversely affected the foreign exchange rate in India. The rupee has been losing value against the dollar over the past few months.

Lending Interest Rate (%)

Bank Lending Rate in India remained unchanged at 9 percent in October from 9 percent in September of 2020.

National Debt

In 2018, the national debt of India amounted to around 1801 billion U.S. dollars. Projections show an​ upward trend, with a significant increase each year. India’s liabilities have increased significantly, and forecasts show no end in sight. While India is a fast-growing economy and considered one of the main emerging economies, the so-called BRIC countries, India has been investing and borrowing money from commercial banks as well as several non-banking finance companies, and its national debt today makes up almost 70 percent of its GDP. 



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