Economic studies


Population 1 299,8 billion
GDP 1742 US$
Country risk assessment
Business Climate
Change country
Compare countries
You've already selected this country.
0 country selected
Clear all
Add a country
Add a country
Add a country
Add a country


major macro economic indicators


  2015 2016 2017(f) 2018(f)
GDP growth** (%) 7.6 6.9 7.0 7.5
Inflation (yearly average, %) 4.9 5.5 4.0 4.5
Budget balance*** (% GDP) -6.9 -6.7 -6.4 -6.0
Current account balance (% GDP) -1.1 -0.5 -0.5 -1.0
Public debt*** (% GDP) 69.6 69.5 67.8 66.5

*Fiscal year 2018: April 2018 - March 2019

**Changes to the methodology in February 2015

***Includes Central government debt and State governments debt (f): forecast


  • Diversified growth drivers
  • High levels of savings and investment
  • Efficient private sector in services
  • Moderate level of external debt and comfortable foreign exchange reserves


  • Lack of infrastructure and shortcomings in the education system
  • Bureaucratic red tape and persistent political tensions
  • Net importer of energy resources
  • Rising level of private firm indebtedness
  • Weak public finances
  • Persistent uncertainties over the Kashmir issue


Growth is expected to rebound

Real GDP is expected to grow quicker in 2018, supported by strong performance in the services sector, after a slight slowdown at the end of FY 2016/17 due to the demonetisation decision of Modi’s administration in November 2016 (withdrawal of the 500 and 1000 rupee notes). Household consumption was negatively affected by this measure, and its impact on the informal sector, although difficult to quantify, has been significant.. However, improved financial integration of the poorest households should support demand in the long term. Inflation reached a record low on June 2017, and remains below the central bank’s target of 4%. A combination of lower commodity prices and a dip in key agricultural products contributed to this decline, enabling the central bank to lower rates in July. However, it is expected that inflation will increase in 2018, as the federal VAT system (Goods and Services Tax, GST), which was implemented on July, exerts upside pressure on prices.

The private sector should continue to benefit from the impact the Modi government’s reforms, aimed at boosting India’s manufacturing sector, attracting FDI, and reducing constraints burdening the economy. India jumped 30 spots to 100 in this year’s “Ease of Doing Business” ranking by the World Bank. However, non-performing loans in the banking system have impacted the monetary policy transmission mechanism by keeping borrowing costs high. This has hindered domestic companies’ willingness to borrow money and invest. Reforms aimed at cleaning up the banking system have been put in place, but these take time and could impact the supply of credit, despite the Reserve Bank of India’s loose stance. Higher government expenditures in infrastructure (transport infrastructure and utilities) should offset this weakness.


Willingness to improve public finances

Fiscal deficit and public debt levels remain high, but the country has initiated plans to reduce them. The most notable of these initiatives is the introduction of the GST, which aims to boost fiscal revenues and make the economy more competitive in the long term, despite some disruption in the short term (higher prices). Fiscal consolidation efforts are facilitated by low energy prices, which remain subdued in line with global oil prices (India is a net importer). In addition, measures to demonetise a portion of outstanding bank notes should improve budget revenue by reducing the weight of the informal economy.

The current account deficit is expected to increase slightly. The increase in imports is partly due to the rising demand for gold after demonetisation. Deficits in the trade balance and income balance are likely to worsen, and the services surplus should also reduce.

The rupee is expected to remain relatively stable in 2018, but like other emerging currencies, it remains vulnerable to a rise in global risk aversion and a faster-than-expected rate of monetary policy tightening in the United States. Foreign exchange reserves are set to remain at comfortable levels (nearly ten months of imports in 2017), and FDI and portfolio investments are on an upward trend.


Narendra Modi supported by regional elections

Narendra Modi’s party, the BJP (Bharatiya Janata Party), won the regional elections in March 2017, gaining 312 out of the 403 seats in the lower house in Uttar Pradesh. This is the most populated state and so is often considered a “popularity barometer” for the government. The victory helps to further strengthen Modi’s position, two years ahead of the next national elections. Demonetisation seems to have weighed on household consumption, but was eventually perceived as a commitment to his campaign proposal to combat inequality and root out corruption. However, as the Congress Party continues to dominate the Upper House, the reforms long-awaited by the business community are delayed.

Kashmir remains a source of tensions between India, Pakistan and the separatists of the region. Diplomatic talks were suspended after an attack on an Indian base in Punjab on January 2016, and relations between the two countries have deteriorated in recent months. New tensions have emerged after the Indian army shot the leader of the main insurgent movement, Sabzar Ahled Bhat, in Kashmir on May 2017. However, an escalation of violence is unlikely as Pakistan and India both have an interest in maintaining the status quo.


Last update : January 2018


Due to the increasingly developed banking network in India, SWIFT bank transfers are becoming more popular for both international and domestic transactions.

Standby Letters of Credit constitute a reliable means of payment, as a bank guarantees the debtor’s credit quality and repayment abilities. Confirmed Documentary Letters of Credit are also recognised, although these can be more expensive, as the debtor guarantees that a certain amount of money is available to the beneficiary via a bank.

Post-dated cheques, a valid method of payment, also act as a debt recognition title. They allow for the initiation of legal and insolvency proceedings in cases of outstanding payments.

Debt collection

Amicable phase

The practice of amicably settling trade receivables has proven to be one of the most productive solutions, as it allows the parties involved to deal with the underlying issues of the settlement in a more efficient and cost-effective manner. Average payment collection periods vary between 30 to 90 days following the establishment of contact with the debtor. Local working practices mean that debtors pay directly to the creditor, rather than to a collection agency. Indian law does not regulates late payments, or provide for a legal enforceable late payment interest rates. In practice, debtors do not pay interest on overdue amounts.

Major issues in the country currently mean that debtors are facing huge financial difficulties. The situation has deteriorated since demonetisation in November 2016 and the introduction of the GST unified tax structure (the Goods & Service Tax), in July 2017. The other main reason for payment delays is the complexity of payment procedures and approvals by banks for the restructuring plans of major players in the manufacturing sector. India is faced with a severe problem of bad loans and most of them have been declared as NPAs by the banks. This deteriorating asset quality has hit the profitability of banks and eroded their capital, thereby curbing their ability to grant much-needed loans to industries for their restructuring and revitalisation.


Legal proceedings

Indian companies have a preference for amicable recovery methods, as the country’s judicial system is both expensive and slow. There is no fixed period for court cases, while the average length is from two to four years. The statute of limitations is three years from the due date of an invoice. The statute of limitations can be extended for an additional three years, if the debtor acknowledges the debt in writing or makes partial payment of the debt.

Legal proceedings are recommended after the amicable phase, if debtor is still operating and in good financial health, is wilfully resisting payment, disputing the claim for insignificant reasons, not honouring payment plans or not providing documentary evidence.


Type of proceedings

Arbitration: Arbitration can be initiated if mentioned in the sales contract - otherwise the case can be sent to the National Company Law Tribunal (the NCLT) for registered companies.

Recovery Suits: Recovery suits tend to become a long, drawn-out battle and are usually regarded as best avoided.

National Company Law Tribunal: The NCLT was created on 1st June, 2016. It has jurisdiction over all aspects of company law concerning registered companies. Its advantages are that it can hear all company affairs in one centralised location and that it offers speedy processes (taking a maximum of 180 days). It also reduces the work load of the High Courts. The NCLT recently enacted a new Insolvency and Bankruptcy Code. Decisions of the NCLT may be appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT acts as the appellate forum and hears all appeals from the NCLT. Appeals from the NCLAT are heard by the Supreme Court of India.

Insolvency proceedings

The Insolvency and Bankruptcy Code, introduced in 2016, proposes two independent stages:


Insolvency resolution process (IRP)

The IRP provides a collective mechanism for creditors to deal with distressed debtors. A financial creditor (for a financial debt), or an operational creditor (for an unpaid operational debt) can initiate an IRP against a debtor at the National Company Law tribunal (NCLT). The Court appoints a Resolution professional to administer the IRP. The Resolution professional takes over the management of the corporate debtor and continues to operate its business. It identifies the financial creditors and holds a creditors committee. Operational creditors above a certain threshold are also allowed to attend meetings, but they do not have voting power. Each decision requires a 75% majority vote. The committee considers proposals for the revival of the debtor and must decide whether to proceed with a revival plan, or to liquidate, within 180 days.



A debtor may be put into liquidation if a 75% majority of the creditors’ committee resolves to liquidate it during the IRP, if the committee does not approve a resolution plan within 180 days, or if the NCLT rejects the resolution plan submitted on technical grounds. Upon liquidation, secured creditors can choose to realise their securities and receive proceeds from the sale of the secured assets as a priority.

Under the current Insolvency and Bankruptcy Code, the highest priority is given to insolvency resolution process and liquidation costs. Thereafter, proceeds are then allocated to employee compensation and secured creditors, followed by unsecured and government dues.

  • English