Economy of India

The economy of India has transitioned from a mixed planned economy to a mixed middle-income developing social market economy with notable public sector in strategic sectors. It is the world's fifth-largest economy by nominal GDP and the third-largest by purchasing power parity. successive governments followed Soviet model and promoted protectionist economic policies, with extensive Sovietization, state intervention, demand-side economics, natural resources, bureaucrat driven enterprises and economic regulation. This is characterised as dirigism, in the form of the Licence Raj. The economy of the Indian subcontinent was the largest in the world for most of recorded history up until the onset of colonialism in early 19th century. Nearly 70% of India's GDP is driven by domestic consumption; country remains the world's fourth-largest consumer market. Apart from private consumption, India's GDP is also fueled by government spending, investments, and exports.

Top Sectors in India

Agriculture in India

Agriculture and allied sectors accounted for 18.4% of the GDP, the sector employed 51.2 crore persons or 45.5% of the workforce in India are employed in agriculture. India is major agriculture producing country and has the most arable land in the world followed by the United States international comparisons reveal the average yield in India is generally 30% to 50% of the highest average yield in the world. The states of Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Andhra Pradesh, Telangana, Bihar, West Bengal, Gujarat and Maharashtra are key contributors to Indian agriculture.

Chemicals in India

The chemical industry contributed $163 billion to the economy in FY18 and is expected to reach $300-400 billion by 2025. The industry employed 17.33 million people (4% of the workforce) in 2016. At present, 57 large fertilizer units are manufacturing a wide number of nitrogen fertilizers. These include 29 urea-producing units and 9 ammonia sulfate-producing units as a by-product. Besides, there are 64 small-scale producing units of single super phosphate. According to the latest data released by the WTO, India has emerged as the second largest exporter of agrochemicals in the world.

Aviation in India

India is the fourth-largest civil aviation market in the world recording an air traffic of 158 million passengers in 2017. The market is estimated to have 800 aircraft by 2020, which would account for 4.3% of global volumes, and is expected to record annual passenger traffic of 520 million by 2037. IATA estimated that aviation contributed $30 billion to India's GDP in 2017, and supported 7.5 million jobs - 390,000 directly, 570,000 in the value chain, and 6.2 million through tourism. As of 2024, There are 75 new airports have been built in the last ten years, taking the total count to 149 airports (include helipads and aerodromes). Government vision is to take this milestone 149 to 220 airports in the next 5 to 7 years and Government of India has a Rs 1 lakh crore capex plan to spend on Airport infrastructure.

Telecommunication in India

The telecommunication sector generated ₹2.20 trillion (US$28 billion) in revenue in 2014-15, accounting for 1.94% of total GDP. India is the second-largest market in the world by number of telephone users with 1.053 billion subscribers as of 31 August 2016. It has one of the lowest call-tariffs in the world, due to fierce competition among telecom operators. India has the world's third-largest Internet user-base. As of 31 March 2016, there were 342.65 million Internet subscribers in the country. India's telecommunication industry is the world's second largest by the number of mobile phone, smartphone, and internet users. It is the world's 24th-largest oil producer and the third-largest oil consumer.

Defence in India

With a strength of over 1.3 million active personnel, the Indian Army is the third-largest military force and the largest volunteer army. Defence expenditure was pegged at US$70.12 billion for fiscal year 2022-23, an increase of 9.8% from the previous fiscal year. India is the world's second-largest arms importer; between 2016 and 2020, it accounted for 9.5% of the total global arms imports. India exported military hardware worth ₹159.2 billion (US$2.0 billion) in the financial year 2022-23, the highest ever and a notable tenfold increase since 2016-17.

India - Key Economic Indicators

Exports and Imports

In the fiscal year 2023-24, India's exports amounted to $350 billion, showing a 15% increase from the previous year. Imports, on the other hand, reached $500 billion, marking a 20% rise compared to the preceding fiscal year.

Infrastructure

Over the past decade, India has made significant strides in infrastructure development. As of 2024, the country has constructed 15,000 kilometers of new roads and bridges, improving connectivity and facilitating economic growth.

Balance of Trade

India's trade deficit widened to $150 billion in the fiscal year 2023-24, reflecting a growing imbalance between exports and imports. Efforts to boost exports and reduce import dependency are underway to address this issue.

Fiscal Policy

The government's fiscal policy for the fiscal year 2023-24 focused on increasing spending on key sectors such as healthcare, education, and infrastructure. Taxation measures were also introduced to streamline revenue collection and promote economic growth.

Monetary Policy

The Reserve Bank of India implemented a series of monetary policy measures to maintain price stability and support economic recovery. These actions included adjustments to interest rates, liquidity injections, and regulatory reforms to ensure the stability of the financial system.

Trade Agreements

India has been actively engaging in trade agreements with various countries and regions to expand market access and promote international trade. Recent agreements include the Comprehensive Economic Partnership Agreement (CEPA) with the European Union and the Regional Comprehensive Economic Partnership (RCEP) with several Asian nations.

Environmental Regulations

In response to growing environmental concerns, the Indian government has implemented stringent regulations to address pollution and promote sustainable development. Measures include emission standards for industries, promotion of renewable energy, and conservation initiatives to protect natural resources.

Tax System in India

Capital gains tax: Capital gains from investments are subject to a tax rate of 20%, with exemptions for long-term investments in certain sectors.
Corporate tax rate: The corporate tax rate stands at 25% for domestic companies and 40% for foreign companies.
Sales tax: A Goods and Services Tax (GST) is levied on the sale of goods and services, ranging from 5% to 28%, depending on the nature of the product or service.
Property tax: Property owners are liable to pay a tax based on the value of their real estate holdings, determined by local authorities.
Payroll tax: A payroll tax, known as the Employee Provident Fund (EPF), is deducted from employees' salaries to fund social security and retirement benefits.
Tax deductions and credits: Various deductions and credits are available to taxpayers, including deductions for education expenses, medical expenses, and investment in certain financial instruments.
Tax compliance: The efficiency of tax collection has improved through the adoption of digital systems and enforcement measures to curb tax evasion.
Tax burden: The overall tax burden on individuals and businesses varies depending on income levels, with higher-income earners typically facing a higher tax liability.

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