Economic Analysis


Population 1393.4 million
GDP per capita 2,280 US$
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major macro economic indicators

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) -6.6 8.3 6.8 5.9
Inflation (yearly average, %) 6.6 5.1 6.7 5.0
Budget balance (% GDP) -12.8 -10.0 -9.9 -9.0
Current account balance (% GDP) 0.9 -1.2 -3.5 -2.9
Public debt (% GDP) 89.2 84.2 84.0 83.8

(e): Estimate (f): Forecast *FY 2023: April 2023-March 2024


  • Diversified growth drivers
  • Immense workforce and population (over 50% of the population under 25) with good command of English
  • Efficient IT services
  • Expatriates’ and diaspora’s remittances, jewellery, garments, vehicles and medicine exports, as well as tourism and IT services, contribute positively to the current account
  • Low level of external debt and adequate FX reserves


  • High corporate debt and non-performing loans (NPL)
  • Net importer of energy resources (one fifth of imports)
  • Lack of adequate infrastructure
  • Weak public finances
  • Bureaucratic red tape, inefficient justice
  • Widespread poverty, inequality, and informality
  • Military confrontation in Kashmir with China and Pakistan
  • Non-participation in regional trade agreements (Regional Comprehensive Economic Partnership Agreement)


Ongoing recovery 

The Indian economy is set to expand further in 2022, building on its 2021 gradual recovery. Private consumption (59% of GDP) rose by 9.3% in the January-September of 2021, and was nearly back to 2019 levels as the labour market improved. The unemployment rate fell from a high of 11.9% in May 2021 at the peak of the Delta wave to around 7% in November 2021. Mobility at recreation, retail and transit stations broadly normalised to pre-pandemic levels. However, strong inflation pressures could weigh on consumption and households could increase their precautionary savings due to greater inflation uncertainty. Business confidence also improved, as reflected by gross fixed investment levels (29% of GDP) restoring to just shy of the 2019 level in the first three quarters of 2021. Public investment (6.9% of GDP) should also be boosted by higher budget allocation (34.5% more in FY21-22 than FY20-21) amid the push to develop much-needed infrastructure under the National Infrastructure Pipeline (NIP) plan to be executed over five years (FY2019-25).

Prior to the pandemic, India’s private domestic demand had been waning in the wake of policy reforms, including the banknote de-monetisation in 2016 and the goods and services tax (GST)’s implementation in 2017, leading GDP growth to slow since FY2017 and reach 4% in FY2019. We see the recovery in both consumption and investment to remain gradual amid persistent downside risks, especially potential virus resurgences. While the share of population fully vaccinated (at 40% in mid-December 2021) continues to lag most of its regional peers, a higher sero-prevalence rate could mitigate risks from future waves. On the supply side, manufacturing (16% of GDP) has rebounded solidly with output already back to pre-pandemic level, while services (50% of GDP) were resilient, led by software services (5% of GDP). Shortages of coal has seen India increasing its production to feed its power plants.

The central bank’s stress tests results in July 2021 and the lifting of a temporary measure to suspend recognition of pandemic-affected loans as nonperforming suggest that non-performing assets (NPAs) of banks and non-banks may rise, despite extensions to the credit guarantee scheme (till 31 March 2022) for MSMEs and loan restructuring scheme. Despite policy support, bank credit growth has remained subdued. Anticipating a possibly surge in NPLs, banks have increased provisioning and raised capital. The government also announced in September 2021 the establishment of a distressed debt bank (National Asset Reconstruction Company Ltd) to acquire up to INR 2 trillion of bad loans. In October 2021, the minimum capital buffer were raised to 2.5%, thereby increasing minimum CET1 capital ratio to 8%.


Weak public finances 

The pandemic has further weakened the fiscal position, with the general government fiscal deficit ballooning to a record 12.8% of GDP in FY20-21 due to economic contraction, lower revenue and support measures. However, the fiscal deficit is expected to narrow as some measures are scaled back amid the recovery. The FY21-22 budget focuses on health-related spending and infrastructure expenditure, and the FY22-23 budget should maintain a mildly expansionary fiscal stance to support the recovery and improve the infrastructure. Therefore, public debt should remain high relative to the pre-pandemic period, but overwhelmingly domestic. Over the medium-term, the government is committed to fiscal consolidation, helped by improvements in GST and income tax buoyancy.

The current account balance is expected to have returned to its usual deficit in 2021, with this shortfall widening in 2022 due to a gradual recovery in domestic demand and higher oil prices. The deficit in the net goods balance for the first half of 2021 was nearly half of the pre-pandemic level. Meanwhile, Indian IT services remain in strong demand, helping to keep the services trade balance in a healthy surplus (3% of GDP). Moreover, India has the largest diaspora population in the world, whose remittances have contributed to a resilient surplus in the secondary income account.


Increasing political pressure

A weakening economic trend in recent years, rising fuel prices and growing dissatisfaction over the government’s pandemic response pose a political challenge to the administration. In a sign of increasing political pressure, Modi announced on 19 November 2021 that he would repeal the controversial agricultural reform laws after the year-long farmers’ demonstrations, which was followed by a parliamentary vote to scrap the three farm laws that aimed at liberalizing agricultural markets. Nevertheless, a fragmented opposition and limited national appeal for most opposition parties (including the main one, the Congress party) means that the BJP is unlikely to see a serious challenge. Meanwhile, the India-China relationship remains strained amid border issues and India’s renewed commitment to the Quadrilateral Security Dialogue that includes the U.S., and its bolstered defence ties with Australia and Japan. On the trade front, India is unlikely to join the RCEP due to concerns of a huge inflow of imports from more competitive regional peers. Instead, India seeks to revive trade talks with the EU and a potential free trade agreement with the US.


Last updated: February 2022


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 June 1, 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.

Enforcement of a Legal Decision

A local judgment can be enforced either by the court that passed it, or by the court to which it is sent for execution (usually where the defendant resides or has property). Common methods of enforcement include delivery, attachment or sale of property, and appointing a receiver. Less common methods include arrest and detention in prison for a period not exceeding three months.

India is not party to any international conventions governing the recognition and enforcement of foreign judgments. However, the Indian government has entered into 11 reciprocal arrangements, and judgments from the courts of these reciprocating countries can be executed in India in the same way as local judgments. For judgments from non-reciprocating territories, a suit must be brought in India based on the foreign judgment before it can be enforced. 

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.

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