The Dive

The Economy of India - Industry & Market Trends in 2023

Last Updated: May 2, 2023
The Summary

What is The Overall Outlook in India?

India, once a colony of the United Kingdom, gained independence in 1947 and has since become the seventh largest country in the world, boasting 28 states and 8 federal territories, covering an area of 2.98 million square kilometers and with a population of 1.38 billion, the second largest in the world. India is a thriving democracy and one of the fastest growing major economies.

After facing a major balance of payments crisis in 1991 that nearly caused the market to collapse, India has undergone major economic transformation, shifting from a government-led planned economy to a more liberalized free market system. The country’s GDP has grown at an average rate of 6.3% from 1991 to 2021. The widespread popularity of English and a highly skilled workforce in information technology has made India an attractive investment destination for many advanced markets, particularly in the tech services sector.

Agriculture remains the main industry in India, employing 43% of the country’s working population, however, the primary drivers of economic growth are trade, finance, and information technology. The service industry is the largest contributor to GDP, accounting for 60%.

The COVID-19 pandemic took a toll on India’s economy in 2020, causing a 6.6% decline. However, the economy rebounded in 2021 with a growth rate of 9% thanks to a combination of factors such as domestic economic recovery, the shift of foreign capital from China to India, the government’s “Make in India” policy, and the growth of exports.

The IMF predicts that the Indian economy will see a growth of 6.9% in 2023 fiscal year, driven by a surge in private consumption and government investment. Private investment is expected to remain sluggish. The growth rate is expected to dip in 2023/24 due to higher borrowing costs and a decline in demand for exports. However, the economy is expected to bounce back from 2024/25.

The Reserve Bank of India (RBI) is expected to stop its monetary tightening process in the second quarter of 2023 and slowly decrease the policy rate, given the moderating growth and ahead of the parliamentary elections.

Table of Contents
Real GDP Growth(%)|Data After 2023 is forecasted by IMF
GDP Per Capita (Current $)|Data After 2023 is forecasted by IMF
GDP Structure

India - Economic Structure & Forecast

GDP Data is updated in January, 2023. Figures below represent GDP contribution with the expenditure approach by segment. Data is sourced from World Bank, IMF, and local government and refactored by our team. Forecasted data is from EIU.

Private Consumption
Government Expenditure
Capital Formation
Net Export
The Market

Economic Snapshot of India

India’s economy has always been driven by private consumption, accounting for 55-65% of the total GDP in the past 20 years. In the future development, due to factors such as the strong growth of domestic household income and the increase of disposable income, private consumption will gradually maintain growth from 59% in 2021 in the next 10 years.

India’s economy has been driven by private consumption for many years. In the past 20 years, it has accounted for about 55-65% of the total GDP. In the future development, it is expected that the proportion of private consumption will gradually maintain growth in the next ten years from 59% in 2021 due to strong domestic household income and the growth of expendable consumption. .

However, the main drivers of economic growth are exports and foreign direct investment. In 2021, these two values will account for 28.5% and 21.4% respectively, showing significant growth compared with the same period last year, and international agencies and the Indian government also expect to continue to grow in the future.

There are two main reasons behind this: First, under the leadership of the Modi government, India is committed to improving the business environment, attracting overseas investment, and promoting the development of India’s manufacturing industry. For example, Labor Reform (Labour Reform) introduced in 2019, Code on Wages (Code on Wages) in 2019, Code on Social Security (Code on Social Security) in 2020, Industrial Relations Code (Industrial Relations Code) in 2020, And the Occupational Safety, Health and Working Conditions Code (Occupational Safety, Health and Working Conditions Code), etc. However, due to the opposition of some local governments in the country, the implementation is suspended, but it is expected that the Indian government will further implement it in the near term.

On the other hand, infrastructure will continue to be strengthened, focusing on the development of manufacturing and industrial sectors, continuing to relax FDI restrictions, and promoting policies to promote foreign investment in local enterprises. These developments will further promote India’s attraction of international investment and increase its regional influence.

According to IMF, the growth in India’s real GDP is forecasted to decrease to 6.1% in the 2023 fiscal year, which is a drop from the 8.8% growth in the previous fiscal year 2021/22. The manufacturing sector has remained weak over the course of 2022 due to increased input costs, though the festive season in October-December 2022 and declining global commodity prices had brought some improvement. However, weaker external demand from key export markets will impact the manufacturing sector in the near term. On the other hand, the services sector is expected to remain stable, with a steady demand for retail trade, software services, commercial real estate, travel, and transport services.

Consumer demand is expected to slowly decline in the this and next year, but low inflation will sustain growth in consumption. Meanwhile, higher interest rates will negatively impact private investment in 2023. In the long term, progress on structural reforms, such as changes to labor laws and investment incentives to boost manufacturing output, will drive economic growth. It is forecasted that the annual real GDP growth will average 6.4% in the next five years.

Unemployment Rate(%)|Forecasted data for after 2023
Inflation Rate(%)|Forecasted data for after 2023
GDP Structure

India - Industry Breakdown & Forecast

GDP Data is updated in January, 2023. Figures below represent GDP contribution with the expenditure approach by segment. Data is sourced from World Bank, IMF, and local government and refactored by our team. Forecasted data is from EIU.

Explore Development in Other Economies
The People

Demographics Outlook in India

Racial Profile

Indo-Aryan 72%, Dravidian 25%, and other 3% (2000)

Languages Used

Hindi 43.6%, Bengali 8%, Marathi 6.9%, Telugu 6.7%, Tamil 5.7%, Gujarati 4.6%, Urdu 4.2%, Kannada 3.6%, Odia 3.1%, Malayalam 2.9%, Punjabi 2.7%, Assamese 1.3%, Maithili 1.1%, other 5.6%

Religions Practiced

Hindu 79.8%, Muslim 14.2%, Christian 2.3%, Sikh 1.7%, other and unspecified 2% (2011 est. by CIA)

Age Structure

India - Population Pyramid

Source:UN; OOSGA Analytics
The Power

Political Outlook & Policy Trends in India

Since India’s independence in 1947 and the split of East and West Pakistan, which was predominantly Muslim and became Bangladesh, and Hindu-majority India, tensions have continued to simmer between the two nations. This resulted in three wars until a ceasefire was finally reached in 2003. Despite the ceasefire, the India-Pakistan Line of Control remains a source of constant conflict and exchanges of fire.

Over the past 75 years, India has transformed from a poor economy with a per capita GDP of less than $50 a year to a low- and middle-income economy with a per capita GDP of approximately $2,500 (2022), making it the country with the largest population in the world and its economic scale is set to surpass the UK to become the fifth largest in the world in 2022.

The political system of India was built on the British Westminster political system and has an upper house, the Rajya Sabha, and a more powerful lower house, the Lok Sabha. The Indian presidency is a five-year term elected position, while the royal family is hereditary. Currently, in 2022, the ruling Bharatiya Janata Party (BJP) and its coalition, the NDA, hold the majority in the Lok Sabha, while the opposition holds the majority in the Rajya Sabha.

Since Prime Minister Modi took office in 2014, the Indian government has implemented many policy reforms, including the reassessment of 150 labor laws and the official passing of relevant bills in 2020, aimed at improving the ease of doing business and stimulating industry and manufacturing growth.

At present, there are three main policy developments in India. The first is to upgrade business and trade infrastructure such as ports, railways, roads, and logistics centers. The second is to reform land policies, which has been ongoing since the government adopted the New Economic Policy in 1991, but has faced resistance from citizens and is not expected to make significant progress after losing the legislative majority in the House of Lords. The last focus is on increasing market power and stimulating business through various mechanisms.

India 2019 Lok Sabha Elections
Current Account Balance (% of GDP)|Forecasted data for after 2023
Government Debt (% of GDP)|Forecasted data for after 2023
The Influence

India - External Outlook

Export (Million Dollars | Nominal)
Export - Percentage of World (‱)
Foreign Direct Investment (Million Dollars | Nominal)
FDI - Percentage of World (‱)
The Market

India - Consumer & Market Outlook

We work with 3rd party data offices and our experts network to deliver the most comprehensive retail & consumer behavior landscape there is.

E-Commerce Development, Penetration, Trends & Outlook in India

Social Media Development, User Demographics, Platforms, and Trends in India

  • Economic Data:OECD, World Bank, IMF、Government Statistics Bureau
  • Currency Exchange:Based on IMF data in 2023/1
  • GDP Growth Projection:OECD、IMF, OECD, EIU、Government Bureau
  • Demographics:UN Population Database
  • Race, Culture, and Languages:CIA Factbook
  • Unemployment Rate Projection:ILO, UNECE
  • Trade:UN Comtrade, UNCTD
  • ICT Infrastructure:ITU
  • Data Calculation &
  • Analysis:OOSGA Analytics
Author: Economic Team, FR Team

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