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Country Forecast India

  • ID: 2138634
  • Country Profile
  • August 2016
  • Region: India
  • 56 Pages
  • The Economist Intelligence Unit
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Background: India gained independence in 1947 after two centuries of British colonial rule. Partition at the same time created the state of Pakistan, with which India has fought three wars, two over the disputed territory of Kashmir. India is the second-most populous country in the world, with more than 1.3bn people in 2015. Its economy is the seventh largest in the world when measured in nominal US dollars, but the third largest according to purchasing power parity exchange rates. A large and inefficient public sector coexists with a sizeable and diversified private sector.

Political structure: India has been a democracy since independence. The growing importance of regional parties has made coalition government the norm at federal level for three decades. In 2014 the Bharatiya Janata Party (BJP) bucked this trend by winning a clear majority at the general election. Democratic procedures are generally respected. The prime minister is the leader of the government, requiring the support of a majority in parliament. The president is the head of state and, although limited in executive power, can influence the formation of governments at both state and national levels when no party has gained an outright majority. The judiciary is formally independent and becoming increasingly assertive.

Policy issues: Despite the BJP's strength in the Lok Sabha (the lower house of parliament), the government will struggle to pass structural reforms owing to an unwillingness to antagonise constituencies with vested interests (such as farmers) and parliamentary obstruction from opposition parties. The BJP has already made progress on kick-starting infrastructure projects. Improving the business environment will also be a priority.
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Country Forecast India

India--highlights: Political outlook

India--highlights: Demographic outlook

India--highlights: Business environment outlook

India--highlights: Economic outlook

India--highlights: Market opportunities

India--highlights: Long-term outlook

Fact sheet

Political outlook: Political forces at a glance

Political outlook: Political stability

Political outlook: Political and institutional effectiveness

Political outlook: Election watch

Political outlook: Key players to watch
Narendra Modi
Rahul Gandhi
Pranab Mukherjee
Arvind Kejriwal

Political outlook: International relations

Demographic assumptions
India will fail to reap the "demographic dividend" fully

Business environment outlook: Business environment rankings
Businesses will find operating in India easier in 2016-20

Business environment outlook: India's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
The labour market

Business environment outlook: Macroeconomic environment
The GST will enhance the business environment

Business environment outlook: Policy towards private enterprise and competition

Business environment outlook: Policy towards foreign investment
Despite bureaucratic difficulties, FDI inflows will rise

Business environment outlook: Foreign trade and exchange controls
Tariff reduction will facilitate trade

Business environment outlook: Taxes
The tax regime will remain difficult

Business environment outlook: Financing
Public sector banks will be recapitalised

Business environment outlook: The labour market
Labour market reform will be only gradual

Business environment outlook: Infrastructure
Government spending will enhance road infrastructure

Economic forecast: Policy trends

Economic forecast: Fiscal policy

Economic forecast: Monetary policy

Economic forecast: International assumptions

Economic forecast: Economic growth

Economic forecast: Sectoral trends

Economic forecast: Inflation

Economic forecast: Exchange rates

Economic forecast: External sector

Economic forecast: Foreign direct investment in India
Stocks and flows
Origin and distribution

Market opportunities: Market outlook
Affordability will remain a concern for consumers

Market opportunities: Consumer expenditure
Food price pressures will reduce discretionary consumption

Market opportunities: Social indicators and living standards

Long-term outlook: The long-term outlook
Demographic challenges will be difficult to overcome
India will become a major economic and diplomatic power

Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data summary: External debt

Data sources and definitions
Global data
Domestic data

Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues

Indicator scores in the business rankings model
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