Indian Economy : A Close Watch And Road Ahead

India: A Snapshot


India, a South Asian nation, is the seventh-largest country by area, the second-most populous country with over 1.33 billion people, and the most populous democracy in the world. India boasts of an immensely rich cultural heritage including numerous languages, traditions and people. The country holds its uniqueness in its diversity and hence has adapted itself to international changes with poise and comfort. While the economy has welcomed international companies to invest in it with open arms since liberalisation in 1990s, Indians have been prudent and pro-active in adopting global approach and skills. Indian villagers proudly take up farming, advanced agriculture and unique handicrafts as their profession on one hand while modern industries and professional services sectors are coming up in a big way on the other.

Thus, the country is attracting many global majors for strategic investments owing to the presence of vast range of industries, investment avenues and a supportive government. Huge population, mostly comprising the youth, is a strong driver for demand and an ample source of manpower.

Location: India lies to the north of the equator in Southern Asia

Latitude: 8° 4′ to 37° 6′ north

Longitude: 68° 7′ to 97° 25′ east

Neighbouring Countries: Pakistan and Afghanistan share political borders with India on the West while Bangladesh and Myanmar stand adjacent on the Eastern borders. The northern boundary comprises the Sinkiang province of China, Tibet, Nepal and Bhutan. Sri Lanka is another neighbouring country which is separated by a narrow channel of sea formed by the Palk Strait and the Gulf of Mannar.

Capital: New Delhi

Coastline: 7,517 km, including the mainland, the coastlines of Andaman and Nicobar Islands in the Bay of Bengal and Lakshadweep Islands in the Arabian Sea.

Climate: Southern India majorly enjoys tropical climate but northern India experiences temperatures from sub-zero degrees to 50 degrees Celsius. Winters embrace northern India during December to February while springs blossom in March and April. Monsoons arrive in June and stay till September, followed by autumn in October and November.

Area: India measures 3,214 km from north to south and 2,933 km from east to west with a total area of 3,287,263 sq km.

Natural Resources: Coal (fourth-largest reserves in the world), iron ore, manganese, mica, bauxite, rare earth elements, titanium ore, chromite, natural gas, diamonds, petroleum, limestone, arable land.

Land: 2,973,190 sq km

Water: 314,070 sq km

Political Profile

Political System and Government:

The world’s largest democracy implemented its Constitution in 1950 that provided for a parliamentary system of Government with a bicameral parliament and three independent branches: the executive, the legislature and the judiciary. The country has a federal structure with elected governments in States.

Administrative Divisions: 29 States and 7 Union Territories

Constitution: The Constitution of India came into force on January 26, 1950

Executive Branch: The President of India is the Head of State, while the Prime Minister is the Head of the government and runs office with the support of the Council of Ministers who forms the Cabinet.

Legislative Branch: The Federal Legislature comprises of the Lok Sabha (House of the People) and the Rajya Sabha (Council of States) forming both the Houses of the Parliament.

Judicial Branch: The Supreme Court of India is the apex body of the Indian legal system, followed by other High Courts and subordinate Courts.

Chief of State: President, Mr Ram Nath Kovind (since July 25, 2017)

Head of Government: Prime Minister, Mr Narendra Modi (since May 26, 2014)

Demographic profile

Population: 1,326,801,000

Population Growth Rate: 1.2 per cent (2015)

Religions: Hinduism, Islam, Christianity, Sikhism, Buddhism, Jainism

Languages: Hindi, English and at least 16 other official languages

Literacy: Total population: 74.04 per cent (provisional data-2011 census)

Male: 82.14 per cent

Female: 65.46 per cent

Suffrage: 18 years of age; universal

Life expectancy: 66.9 years (men), 69.9 years (women) (2015 – WHO 2016 Report)

Economic Profile

Indian Economy

According to The World Bank, the Indian economy will likely grow at 7 per cent in 2016-17, followed by further acceleration to 7.6 per cent in 2017-18 and 7.8 per cent in 2018-19.

  • Gross Domestic Product (GDP) Composition by Sector (2016 Estimate)
    • Services: 45.4 per cent
    • Industry: 29.8 per cent
    • Agriculture: 16.5 per cent
  • Forex Reserves: US$ 366.78 billion as on March 17, 2017.
  • Gross Fixed Capital Formation (GFCF) at current prices: Gross Fixed Capital Formation (GFCF) at current prices stood at Rs 8,797.63 billion (US$ 135.36 billion) in the fourth quarter of 2016.
  • Value of Exports: India’s exports stood at US$ 29.23 billion in March 2017.
  • Export Partners: US, Germany, UAE, China, Japan, Thailand, Indonesia and European Union. India is also tapping newer markets in Africa and Latin America.
  • Currency (code): Indian rupee (INR)
  • Exchange Rates: Indian rupees per US dollar – 1 USD = 65.0892 INR (March 27, 2017)
  • Fiscal Year: April 01 – March 31
  • Cumulative FDI Equity Inflows: US$ 324.357 billion (April 2000 to December 2016)
  • Share of Top Investing Countries FDI Equity Inflows: Mauritius (34 per cent), Singapore (16 per cent), UK (8 per cent), Japan (8 per cent), USA (6 per cent), Netherlands (6 per cent) (as in December 2016)
  • Major Sectors Attracting Highest FDI Equity Inflows: Services Sector (18 per cent), Construction Development (8 per cent), Computer Software and Hardware (7 per cent), Telecommunications (7 per cent), Automobile (5 per cent), Drugs and Pharmaceuticals (4 per cent), Chemical (4 per cent), Trading (4 per cent) (as in December 2016)

Transportation in India

Airports: Airports Authority of India (AAI) manages 125 airports in the country, which includes 18 international aerodromes, 78 domestic ones and 26 civil enclaves at defence airfields.

International Airports: Ahmedabad, Amritsar, Bengaluru, Chennai, Goa, Guwahati, Hyderabad, Kochi, Kolkata, Mumbai, New Delhi, Thiruvananthapuram, Port Blair, Srinagar, Jaipur, Nagpur, Calicut, Tiruchirappalli, Coimbatore

Railways: The Indian Railways network is spread over 108,706 km, with 12,617 passenger and 7,421 freight trains each day from 7,172 stations plying 23 million travellers and 3 million tonnes (MT) of freight daily.

Roadways: India’s road network of 4.87 million km is the second largest in the world. With the number of vehicles growing at an average annual pace of 10.16 per cent, Indian roads carry about 65 per cent of freight and 85 per cent of passenger traffic.

Waterways: 14,500 km

Major Ports of Entry: Chennai, Ennore, Haldia, Jawaharlal Nehru Port Trust (JNPT), Kolkata, Kandla, Kochi, Mormugao, Mumbai, New Mangalore, Paradip, Tuticorin and Vishakhapatnam.


India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF). The Government of India has forecasted that the Indian economy will grow by 7.1 per cent in FY 2016-17. As per the Economic Survey 2016-17, the Indian economy should grow between 6.75 and 7.5 per cent in FY 2017-18. The improvement in India’s economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, Reserve Bank of India’s (RBI) inflation focus supported by benign global commodity prices.

India’s consumer confidence index stood at 136 in the fourth quarter of 2016, topping the global list of countries on the same parameter, as a result of strong consumer sentiment, according to market research agency, Nielsen.

Moody’s has affirmed the Government of India’s Baa3 rating with a positive outlook stating that the reforms by the government will enable the country perform better compared to its peers over the medium term.

Market size

India’s gross domestic product (GDP) grew by 7 per cent year-on-year in October-December 2016 quarter, which is the strongest among G-20 countries, as per Organisation for Economic Co-operation and Development (OECD) Economic Survey of India, 2017. According to IMF World Economic Outlook Update (January 2017), Indian economy is expected to grow at 7.2 per cent during FY 2016-17 and further accelerate to 7.7 per cent during FY 2017-18.

The tax collection figures between April 2016 and January 2017 show an increase in Net Indirect taxes by 16.9 per cent and an increase in Net Direct Taxes by 10.79 per cent year-on-year, indicating a steady trend of healthy growth. The total number of e-filed Income Tax Returns rose 21 per cent year-on-year to 42.1 million in 2016-17 (till 28.02.17), whereas the number of e-returns processed during the same period stood at 43 million.

Corporate earnings in India are expected to grow by over 20 per cent in FY 2017-18 supported by normalisation of profits, especially in sectors like automobiles and banks, while GDP is expected to grow by 7.5 per cent during the same period, according to Bloomberg consensus.

India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new start-ups being founded in 2016, according to a report by NASSCOM.

India’s labour force is expected to touch 160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute.

India’s foreign exchange reserves stood at US$ 366.781 billion as on March 17, 2017 as compared to US$ 360 billion by end of March 2016, according to data from the RBI.

Recent Developments

With the improvement in the economic scenario, there have been various investments leading to increased M&A activity. Some of them are as follows:

M&A activity in India more than doubled year-on-year to reach US$ 61.26 billion in 2016-17. Early-stage start-ups in India are expected to raise US$ 800 million in 2017, due to greater focus on profitability and sustainable growth, as per a report by InnoVen Capital.

  • NITI Aayog, Department of Industrial Policy & Promotion (DIPP) and Confederation of Indian Industry (CII) launched an “India Innovation Index” in line with the Global Innovation Index (GII) to rank states based on innovation by capturing innovation data from all Indian states and updating them regularly.
  • The Union Cabinet, Government of India, has approved the Central Goods and Services Tax (CGST), Integrated GST (IGST), Union Territory GST (UTGST), and Compensation Bill.
  • The Union Cabinet has approved a memorandum of understanding (MoU) between India and United Arab Emirates (UAE), aimed at enhancing cooperation in the field of small and medium enterprises (SMEs) between the two countries, and thereby providing an opportunity for the Indian SMEs to improve and innovate further.
  • The Union Cabinet has approved a MoU between India and the African Asian Rural Development Organisation (AARDO), to implement capacity building programmes for rural development.
  • The Union Cabinet has approved a MoU between India and Hungary, aimed at improving bilateral cooperation in the field of water management, which is expected to develop relations between public and private organizations concerning water resources of both the countries.
  • The Government of India and the Government of the United States of America have signed a MoU to enhance cooperation on energy security, clean energy and climate change through increased bilateral engagement and further joint initiatives for promoting sustainable growth.
  • The Government of India plans to auction 280 mines with an estimated mineral value of over Rs 10 lakh crore (US$ 153.64 billion) in the fiscal year 2017-18, and also use drone technology to prepare topography maps and inspect mines.
  • Indian merchandise exports registered a growth of 17.48 per cent year-on-year in February 2017 at US$ 24.49 billion, according to the data from Ministry of Commerce & Industry
  • Retail price inflation for February 2017 was reported at 3.65 per cent, compared to 5.26 per cent a year ago, as per CSO.
  • India’s industry output grew 2.74 per cent year-on-year in January 2017, led by a good performance in the capital goods sector which registered a 10.7 per cent year-on-year growth.

Government Initiatives

The Government of India announced demonetisation of high denomination bank notes of Rs 1000 and Rs 500, with effect on November 8, 2016, in order to eliminate black money and the growing menace of fake Indian currency notes, thereby creating opportunities for improvement in economic growth.

In the Union Budget 2017-18, the Finance Minister, Mr Arun Jaitley, verified that the major push of the budget proposals is on growth stimulation, providing relief to the middle class, providing affordable housing, curbing black money, digitalisation of the economy, enhancing transparency in political funding and simplifying the tax administration in the country.

India’s unemployment rate has declined to 4.8 per cent in February 2017 compared to 9.5 per cent in August 2016, as a result of the Government’s increased focus towards rural jobs and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme.

The Government of Maharashtra has set a target to double farm income by 2022 through measures like large scale micro irrigation, water conservation, expansion of formal cash credit coverage, crop insurance and agriculture diversification, as per Mr Vidyasagar Rao, Governor of Maharashtra.

Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India. Mr. Narendra Modi, Prime Minister of India, has launched the Make in India initiative with an aim to boost the manufacturing sector of Indian economy, to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors. The Government of India, under the Make in India initiative, is trying to give boost to the contribution made by the manufacturing sector and aims to take it up to 25 per cent of the GDP from the current 17 per cent. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy.

Some of the recent initiatives and developments undertaken by the government are listed below:

  • Finance Minister Mr Arun Jaitley has stated that start-ups incorporated after March 31, 2016, can avail a three-year tax holiday in the first seven years of their existence, instead of five years, and reduced the tax rate for enterprises with a turnover up to Rs 50 crores (US$ 7.68 million) to 25 per cent instead of the earlier 30 per cent.
  • The Ministry of Corporate Affairs (MCA) has launched a Simplified Proforma for Incorporating Company Electronically (SPICE), aimed at providing speedy services for incorporation to bring ease of doing business in the country on a par with global norms.
  • The Government of India has unveiled a new Urban Development strategy for the next 20 years, aimed at development of rural and urban areas, providing housing for the urban poor and ensuring gender equity in the country among other objectives.
  • The Government of India has raised Rs 30,000 crore (US$ 4.61 billion) through disinvestment proceeds, the highest amount raised via stake sales, and further aims to meet the disinvestment target of Rs 56,500 crore (US$ 8.68 billion) for the year, as per Mr Neeraj Gupta, Secretary, Department of Investment and Public Asset Management (DIPAM).
  • The Government of India along with its investment promotion agency, Invest India, are in discussion with around 300 Indian and foreign companies to channelize investments worth US$ 62 billion, which will help create over 1.7 million job opportunities in India.
  • The Union Cabinet, Government of India, has approved Rs 10,000 crore (US$ 1.53 billion) initial corpus for the Fund of Funds for Start-ups (FFS) established in June 2016.
  • The Ministry of Housing and Urban Poverty Alleviation, Government of India, has approved the construction of 1,17,814 affordable houses for the urban poor and will provide an assistance of Rs 1,816 crore (US$ 279 million) under the Prime Minister’s Awas Yojana (Urban).
  • The Ministry of Women and Children Development, Government of India, plans to implement the Integrated Child Development Services (ICDS) Scheme, Scheme for Adolescent Girls (AGs) and Maternity Benefit Programme (MBP), which aim to deal with the problem of malnutrition in the country, for which the Government has released funds worth Rs 23,092 crore (US$ 3.53 billion) to States and Union Territories.
  • Mr Arvind Panagariya, Vice Chairman, Niti Aayog, has stated that the three-year action plan of the Niti Aayog to boost industry and growth by bringing reforms especially in the areas of agriculture, education and healthcare, will likely start from FY 2017-18.
  • The Government of India has certified 20 private organisations as incubators under the Startup India Action Plan, which is expected to promote entrepreneurship, provide pre-incubation training and a seed fund for high growth start-ups in the country.
  • The Ministry of Commerce and Industry plans to establish India as a hub for world class designing by setting up four National Institute of Design (NIDs) across the country, aimed at providing skills to empower India’s human capital towards world class designing.

Under the Digital India initiative numerous steps have been taken by the Government of India. Some of them are as follows:

  • The Government of India plans to revamp two of its digital initiatives, the United Payment Interface (UPI) and Unstructured Supplementary Service Data (USSD), to enable consumers to easily make transactions digitally, with or without an Internet connection, and thereby strengthen its push towards making India a digital economy.
  • Prime Minister, Mr Narendra Modi has launched the Bharat Interface for Money (BHIM) app, an Aadhaar-based mobile payment application that will allow users to make digital payments without having to use a credit or debit card.
  • The Government of India has launched a digital employment exchange which will allow the industrial enterprises to find suitable workers and the job-seekers to find employment. The core purpose of the initiative is to strengthen the communication between the stakeholders and to improve the efficiencies in service delivery in the MSME ministry. According to officials at the MSME ministry over 200,000 people have so far registered on the website.
  • The Ministry of Human Resource Development recently launched Kendriya Vidyalaya Sangthan’s (KVS) e-initiative ‘KV ShaalaDarpan’ aimed at providing information about students electronically on a single platform. The program is a step towards realising Digital India and will depict good governance.
  • The Government of India announced that all the major tourist spots like Sarnath, Bodhgaya and Taj Mahal will have a Wi-Fi facility as part of digital India initiative. Besides, the Government has started providing free Wi-Fi service at Varanasi ghats.
  • The Government of India has launched an initiative to create 100 smart cities as well as Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for 500 cities with an outlay of Rs 48,000 crore (US$ 7.47 billion) and Rs 50,000 crore (US$ 7.34 billion) crore respectively. Smart cities are satellite towns of larger cities which will consist of modern infrastructure and will be digitally connected.
  • The number of internet users in India is expected to reach 730 million by 2020, supported by fast adoption of digital technology, according to a report by NASSCOM.

Road Ahead

According to The World Bank, the Indian economy will likely grow at 7 per cent in 2016-17, followed by further acceleration to 7.6 per cent in 2017-18 and 7.8 per cent in 2018-19. Demonetisation is expected to have a positive impact on the Indian economy, which will help foster a clean and digitised economy in the long run, according to Ms Kristalina Georgieva, Chief Executive Officer, The World Bank.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers. Also, the Prime Minister, Mr Narendra Modi has stated that India has become the world’s fastest growing large economy, and is expected to grow five-fold by 2040, owing to a series of policy measures.

Exchange Rate Used: INR 1 = US$ 0.01536 as on March 28, 2017


India’s Foreign Trade: July 2017

Press Information Bureau:  August 16, 2017


EXPORTS (including re-exports)

In continuation with the positive growth exhibited by exports for the last eleven months, exports during July 2017 have shown growth of 3.94 per cent in dollar terms valued at US$ 22543.80 million as compared to US$ 21689.57 million during July,2016. In Rupee terms, during July 2017 exports were valued at Rs. 145308.10 crore as compared to Rs.145770.39 crore during July,2016, registering a negative growth of 0.32 per cent.

During July 2017, Major commodity groups of export showing positive growth over the corresponding month of last year are Engineering Goods (15.16%), Petroleum Products (20.27%), Organic & Inorganic Chemicals (20.67%), Cotton Yarn/Fabs./made-ups, Handloom Products etc.( 5.39%) and Marine Products(30.53%)

Cumulative value of exports for the period April-July 2017-18 was US $ 94756.13 million (Rs 610780.14 crore) as against US $ 87001.34 million (Rs 582731.37 crore) registering a positive growth of 8.91 per cent in Dollar terms and 4.81 per cent in Rupee terms over the same period last year.

Non-petroleum and Non Gems & Jewellery exports in July 2017 were valued at US$ 22543.80 million against US$ 21689.57 million in July 2016, an increase of 6.93%. Non-petroleum and Non Gems and Jewellery exports during April -July 2017-18 were valued at US$ 94756.13 million as compared to US$ 87001.34 million for the corresponding period in 2016-17, an increase of 9.05%.


Imports during July 2017 were valued at US$ 33993.61 million (Rs 219108.89 crore) which was 15.42 per cent higher in Dollar terms and 10.70 per cent higher in Rupee terms over the level of imports valued at US$ 29450.97 million (Rs. 197932.93 crore) in July, 2016. Cumulative value of imports for the period April-July 2017-18 was US$ 146256.71 million (Rs. 942740.00 crore) as against US$ 113996.75 million (Rs. 763687.22 crore) registering a positive growth of 28.30 per cent in Dollar terms and 23.45 per cent in Rupee terms over the same period last year.

Major commodity group of imports showing high growth in July 2017 over the corresponding month of last year are Petroleum, Crude & products (15.02%), Electronic goods (22.5%), Machinery, electrical & non-electrical (7.34%), Pearls, precious & Semi-precious stones (6.86%) and Gold (95.05%).


Oil imports during July, 2017 were valued at US$ 7844.94 million which was 15.02 percent higher than oil imports valued at US$ 6820.34 million in July 2016. Oil imports during April-July, 2017-18 were valued at US$ 31022.43 million which was 20.87 per cent higher than the oil imports of US$ 25666.96 million in the corresponding period last year.

In this connection it is mentioned that the global Brent prices ($/bbl) have increased by 8.03 % in July 2017 vis-à-vis July 2016 as per World Bank commodity price data (The pink sheet).

Non-oil imports during July, 2017 were estimated at US$ 26148.67 million which was 15.55 per cent higher than non-oil imports of US$ 22630.63 million in July, 2016. Non-oil imports during April-July 2017-18 were valued at US$ 115234.28 million which was 30.46 per cent higher than the level of such imports valued at US$ 88329.79 million in April-July, 2016-17.

  1. TRADE IN SERVICES (for June, 2017, as per the RBI Press Release dated 14th August, 2017)

EXPORTS (Receipts)

Exports during June 2017 were valued at US$ 13388 Million (Rs. 86276.29 Crore) registering a negative growth of 0.31 per cent in dollar terms as compared to positive growth of 4.08 per cent during May 2017 (as per RBI’s Press Release for the respective months).

IMPORTS (Payments)

Imports during June 2017 were valued at US$ 7457 Million (Rs. 48055.15 Crore) registering a negative growth of 2.07 per cent in dollar terms as compared to positive growth of 5.44 per cent during May 2017 (as per RBI’s Press Release for the respective months).


MERCHANDISE: The trade deficit for July 2017 was estimated at US$ 11449.81 million as against the deficit of US$ 7761.40 million during July 2016.

SERVICES: As per RBI’s Press Release dated 14th August 2017, the trade balance in Services (i.e. net export of Services) for June, 2017 was estimated at US$ 5931 million.

OVERALL TRADE BALANCE: Taking merchandise and services together, overall trade deficit for April-July 2017-18 is estimated at US$ 34072.58 million as compared to US$ 10799.41 million during April-July 2016-17. (Services data pertains to April-June 2017-18 as June 2017 is the latest data available as per RBI’s Press Release dated 14th August 2017) 



EXPORTS & IMPORTS  : (US $ Million)
EXPORTS(including re-exports)
2016-17 21689.57 87001.34
2017-18 22543.80 94756.13
%Growth 2017-18/ 2016-17 3.94 8.91
2016-17 29450.97 113996.75
2017-18 33993.61 146256.71
%Growth 2017-18/ 2016-17 15.42 28.30
2016-17 -7761.40 -26995.41
2017-18 -11449.81 -51500.58
EXPORTS & IMPORTS  : (Rs. Crore)
EXPORTS(including re-exports)
2016-17 145770.39 582731.37
2017-18 145308.10 610780.14
%Growth 2017-18/ 2016-17 -0.32 4.81
2016-17 197932.93 763687.22
2017-18 219108.89 942740.00
%Growth 2017-18/ 2016-17 10.70 23.45
2016-17 -52162.54 -180955.85
2017-18 -73800.79 -331959.86



(Provisional) June 2017
EXPORTS (Receipts) 13388
IMPORTS (Payments) 7457
(Provisional) June 2017
EXPORTS (Receipts) 86276.29
IMPORTS (Payments) 48055.15
Source: RBI Press Release dated 14th August,2017


The Economic Survey 2014-15, was tabled in Parliament on February 27, 2015, by Mr Arun Jaitley, Union Minister for Finance, Government of India. The Survey forecasts a growth rate of over 8 per cent for FY16, as compared to the growth rate of 7.4 per cent in FY15. As per the Economic Survey, India must adhere to medium-term fiscal deficit target of 3 percent of the country’s gross domestic product (GDP). Robust reforms, push for Make in India and a better external environment indicate a double-digit growth trajectory, highlighted the Survey.

The main highlights of the survey are:

  • Over 6 per cent points decline in inflation since late 2013.
  • Current Account Deficit down from a peak of 6.7 per cent of GDP (in Q3, 2012-13) to an estimated 1 per cent in 2014-15.
  • Foreign portfolio flows have stabilized the rupee.
  • Real GDP growth at 7.2 per cent since 2013-14, after a nearly 12-quarter phase of deceleration.
  • Inflation likely to remain in the 5-5.5 per cent range, creating space for easing of monetary conditions.
  • GDP growth expected to accelerate between 8.1 and 8.5 per cent in 2015-16.
  • Fiscal deficit target of 4.1 per cent appears achievable.
  • Private investment to be the engine of long-run growth.
  • Case for reviving targeted public investment as an engine of growth in the short run to complement and crowd-in private investment.
  • India must adhere to medium-term fiscal deficit target of 3 percent of GDP.
  • Expenditure control with growth recovery and GST will ensure that medium-term targets are met.
  • The quality of expenditure needs to be shifted from consumption to investment.
  • The direct fiscal cost of all the subsidies is roughly Rs 378,000 crore (US$ 61.15 billion) or 4.2 percent of 2011-12 GDP.
  • JAM Number Trinity – Jan Dhan Yojana, Aadhaar, Mobile can enable the State to transfer financial resources to the poor in a progressive manner without leakages and with minimal distorting effects.
  • Econometric evidence suggests that the railways public investment multiplier (the effect of a Rs 1 (US$ 0.016) increase in public investment in the railways on overall output) is around 5.
  • India has cut subsidies and increased taxes on fossil fuels (petrol and diesel along with a coal cess) turning a carbon subsidy regime into one of carbon taxation. The implicit carbon tax is US$ 140 for petrol and US$ 64 for diesel.
  • FFC transfers are highly progressive; that is, states with lower per capita NSDP receive on average much larger transfers per capita.
  • Food grain production for 2014-15 estimated at 257.07 million tonnes (MT); to exceed that of last 5 years by 8.5 million tonnes.
  • Food Subsidy Bill stands at Rs 107,823.75 crore (US$ 17.43 billion) during 2014-15 (upto January, 2015), an increase of 20 per cent over previous year.
  • Groundnut production increased by a massive 105.8 per cent in 2013-14, shows a remarkable increase of 75.9 per cent in productivity.
  • Agriculture and allied sectors contribute 18 per cent to GDP and has grown by 3.7 per cent in 2013-14.
  • Indian higher education system is one of the largest in the world with 713 universities, 36,739 colleges and 11,343 diploma-level institutions.
  • As of December 2013 over 720 million citizens had been allocated an Aadhaar card. By December 2015 the total number of Aadhaar enrolments in the country is expected to exceed 1 billion.
  • With over 900 million cell phone users and close to 600 million unique users, mobile money offers a complementary mechanism of delivering direct benefits to a large proportion of the population. And this number is increasing at a rate of 2.82 million per month.
  • India has the largest postal network in the world with over 155,015 post offices of which (89.76 percent) are in the rural areas.
  • Recovery of industrial production is led by the infrastructure sectors namely electricity, coal and cement.
  • Civil aviation sector has seen healthy increase in international passengers and cargo handled at Indian airports during 2014-15.
  • Major initiatives are implementation of public-private partnership (PPP) projects at four airports of the AAI, setting up of greenfield airports and development of small airports in tier II and tier III cities.
  • India’s National Solar Mission being scaled up five-fold to 100,000 megawatts (MW).
  • Clean energy cess doubled to Rs 100 (US$ 1.61) per tonne to mop up Rs 17,000 crores (US$ 2.74 billion) in NCEF.



Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc. For a country where foreign investments are being made, it also means achieving technical know-how and generating employment.

The Indian government’s favourable policy regime and robust business environment have ensured that foreign capital keeps flowing into the country. The government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others.

Market size

According to Department of Industrial Policy and Promotion (DIPP), the total FDI investments India received during April 2016-March 2017 rose 8 per cent year-on-year to US$ 60.08 billion, indicating that government’s effort to improve ease of doing business and relaxation in FDI norms is yielding results.

Data for April 2016-March 2017 indicates that the services sector attracted the highest FDI equity inflow of US$ 8.69 billion, followed by telecommunications – US$ 5.56 billion, and computer software and hardware – US$ 3.65 billion. Most recently, the total FDI equity inflows for the month of March 2017 touched US$ 2.45 billion.

During April 2016-March 2017, India received the maximum FDI equity inflows from Mauritius (US$ 15.73 billion), followed by Singapore (US$ 8.71 billion), Japan (US$ 4.71 billion), Netherlands (US$ 3.37 billion), and USA (US$ 2.38 billion).

Indian impact investments may grow 25 per cent annually to US$ 40 billion from US$ 4 billion by 2025, as per Mr Anil Sinha, Global Impact Investing Network’s (GIIN’s) advisor for South Asia.

Investments/ developments

India has become the fastest growing investment region for foreign investors in 2016, led by an increase in investments in real estate and infrastructure sectors from Canada, according to a report by KPMG.

Some of the recent significant FDI announcements are as follows

  • Toronto-based Canada Pension Plan Investment Board (CPPIB) made investments worth Rs 9,120 crore (US$ 1.41 billion) in India during FY 2016-17, taking their total investment in India to Rs 22,560 crore (US$ 3.50 billion).
  • SoftBank is planning to invest its new US$ 100 billion technology fund in market leaders in each market segment in India as it is seeks to begin its third round of investments.
  • UAE-based firm, DP World, having previously invested US$ 1 billion in India, is planning to invest another US$ 1 billion in India’s infrastructure sector along with logistics and container terminals.
  • Xander Group Inc. and APG Asset Management NV have purchased an Information Technology (IT) Special Economic Zone (SEZ) in South Chennai from Shriram Properties and Infrastructure Pvt. Ltd and SUN-AREA Property Partners for a consideration of approximately US$ 350 million.
  • The infrastructure sector in India witnessed 33 deals in FY 2016-17 involving US$ 3.49 billion as against US$ 2.98 billion raised across 31 deals in FY 2015-16, with the majority of deals led by the power, roads and renewable sectors, as per investment bank Equirus Capital.
  • Developers from China and Japan will invest US$ 3-4 billion in India’s real estate sector over the next three years owing to positive regulatory reforms taken by the Government of India such as implementation of the Real Estate Investment Regulatory Act, as per Mr Christian Ulbrich, Chief Executive Officer (CEO), JLL Inc.
  • Walmart, global retail giant, plans to open 50 new cash-and-carry stores in India over the next three to four years and locate half of the stores in Uttar Pradesh and Uttarakhand while creating over 40,000 jobs in the two states.
  • Global e-commerce giant, Amazon is planning to enter the Indian food retailing sector by investing US$ 515 million in the next five years, as per Mr Harsimrat Kaur Badal, Minister of Food Processing Industries, Government of India.
  • The Government’s Make in India campaign has attracted investment across sectors from various Chinese companies, as is evident from cumulative Foreign Direct Investment (FDI) inflows of Rs 9,933.87 crore (US$ 1.54 billion) between 2014 and December 2016.
  • The capital inflows to India from Canadian institutional investors was estimated to reach over US$ 6.5 billion in March 2016, making Canada the fifth largest foreign direct investment (FDI) partner of the country, with major investments in infrastructure projects by Brookfield, Canada Pension Plan Investment Board (CPPIB), Ontario Teachers and Fairfax, among other institutions.
  • Coca-Cola, the US-based beverage giant, plans to invest around Rs 750 crore (US$ 116.20 million) to set up a food processing unit and a bottling plant at the newly developed Mohasa-Babai industrial estate in Hoshangabad, Madhya Pradesh.
  • Cairn India Limited, India’s largest onshore crude producer, plans to invest around Rs 30,000 crore (US$ 4.65 billion) in the next three years, to increase output by as much as 100,000 barrels a day of oil and gas from its Rajasthan fields.
  • Ford Motor Co. plans to invest Rs 1,300 crore (US$ 195 million) to build a global technology and business centre in Chennai, which will be designed as a hub for product development, mobility solutions and business services for India and other markets.
  • China based LCD and touchscreen panel manufacturer, Holitech Technology, plans to invest up to US$ 1 billion in India by 2017, as per the company’s CEO Mr Bingshuang Chen.
  • Mr Abdul Lahir Hassan, Chairman of UAE-based Gamma Group, outlined plans of investing around Rs 3,000 crore (US$ 436.5 million) in the infrastructure, health and education sectors of Kerala, which is expected to generate around 2,000 indirect and direct jobs in the state.
  • Mr Stephane Descarpentries, Director of operations FM Logistic Asia, outlined plans of investing around EUR 50 million (US$ 52.9 million) in India in the next four years, to contribute to a better efficiency of logistics market in the country.
  • The first Incredible India Tourism Investment Summit 2016, which was organised from September 21-23, 2016, witnessed signing of 86 Memoranda of Understanding (MoUs) worth around Rs 15,000 crore (US$ 2.18 billion), for the development of tourism and hospitality projects.
  • Apple Inc has started its first development centre outside the US in Hyderabad, which will employ over 4,000 people and focus on Apple Maps, the company’s digital maps and navigation service.

Government Initiatives

The Union Cabinet has approved raising of bonds worth Rs 2,360 crore (US$ 365.63 million) by the Indian Renewable Energy Development Agency (IREDA), which will be used in various renewable energy projects in FY 2017-18.

The Ambassador of Japan to India, Mr Kenji Hiramatsu, has conveyed Government of Japan’s inclination to invest and offer any other feasible support for various ongoing as well as upcoming development and infrastructure projects in the North-Eastern region of India.

The Government of India is likely to allow 100 per cent foreign direct investment (FDI) in cash and ATM management companies, since they are not required to comply with the Private Securities Agencies Regulations Act (PSARA).

The Government of India plans to scrap the Foreign Investment Promotion Board (FIPB), which would enable the foreign investment proposals requiring government approval to be cleared by the ministries concerned, and thereby improve the ease of doing business in the country.

The Government of India has approved 100 per cent foreign direct investment (FDI) in other financial services carried out by non-banking finance companies (NBFCs), which is expected to attract more foreign capital into the country.

The National Highways Authority of India (NHAI) plans to offer a risk cover to foreign investors who are willing to invest in government owned operational national highways, which would cover risk associated with the possibility of structural design fault, sub-standard quality of construction, and loss of traffic.

The Department of Industrial Policy and Promotion (DIPP) has allowed 100 per cent foreign direct investment (FDI) in asset reconstruction companies (ARC) under automatic route, which will help to tackle the issue of declining asset quality of banks.

The Government of India has amended the FDI policy regarding Construction Development Sector. The amended policy includes easing of area restriction norms, reduction of minimum capitalisation and easy exit from project. Further, in order to provide boost to low cost affordable housing, it has indicated that conditions of area restriction and minimum capitalisation will not apply to cases committing 30 per cent of the project cost towards affordable housing.

The Government of Karnataka has approved three investment proposals worth Rs 2,211 crore (US$ 321.7 million), which includes that of PepsiCo and Biocon for setting up their new production facilities in the state, and one expansion project proposal of Manyata Promoters Private Limited.

The government has also raised FDI cap in insurance from 26 per cent to 49 per cent through a notification issued by the DIPP. The limit is composite in nature as it includes foreign investment in the form of foreign portfolio investment, foreign institutional investment, qualified foreign investment, foreign venture capital investment, and non-resident investment.

India’s cabinet cleared a proposal which allows 100 per cent FDI in railway infrastructure, excluding operations. Though the initiative does not allow foreign firms to operate trains, it allows them to invest in areas such as creating the network and supplying trains for bullet trains etc.

Road ahead

The World Bank has stated that private investments in India is expected to grow by 8.8 per cent in FY 2018-19 to overtake private consumption growth of 7.4 per cent, and thereby drive the growth in India’s gross domestic product (GDP) in FY 2018-19.

According to United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2016, India acquired 10th slot in the top 10 countries attracting highest FDI inflows globally in 2015. The report also mentioned that among the investment promotion agencies, India has moved up by one rank to become the sixth most preferred investment destination.

India will require around US$ 1 trillion in the 12th Five-Year Plan (2012–17), to fund infrastructure growth covering sectors such as highways, ports and airways. This would require support from FDI flows. India’s growth rate, along with competitive location in terms of wages and policies like Stand Up India, is expected to boost FDI in the coming future.

Exchange Rate Used: INR 1 = US$ 0.01549 as on May 31, 2017.

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