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- GDP (PPP):
- $8.0 trillion
- 7.3% growth
- 6.7% 5-year compound annual growth
- $6,162 per capita
- Inflation (CPI):
- FDI Inflow:
India is a significant force in world trade. Corruption, underdeveloped infrastructure, and poor management of public finance continue to undermine overall development, although the economy has sustained an average annual growth rate of about 7 percent over the past five years.
Growth is not deeply rooted in policies that preserve economic freedom. Progress on market-oriented reforms has been uneven. The state maintains an extensive presence in many areas through public-sector enterprises. A restrictive and burdensome regulatory environment discourages the entrepreneurship that could provide broader private-sector growth.
India is a stable democracy. It is 80 percent Hindu but also home to one of the world’s largest Muslim populations. Prime Minister Narendra Modi, leader of the Bharatiya Janata Party, took office in 2014 and is credited with reinvigorating India’s foreign policy. Modi, who in June 2016 made his fourth visit to the United States in two years, has bolstered ties with the U.S., particularly in defense cooperation. India has technology and manufacturing sectors as advanced as any in the world as well as traditional sectors characteristic of a lesser developed economy. Extreme wealth and poverty coexist as the nation both modernizes rapidly and struggles to find paths to inclusive development for its large and diverse population.
Real property rights are generally well enforced in metropolitan areas, although titling remains unclear in many other urban and rural areas. The judiciary is independent, but courts are understaffed and lack the technology necessary to clear an enormous backlog. Domestic and international pressure led to passage of legislation aimed at addressing corruption, but there is little evidence that it is being implemented effectively.
The top individual income tax rate is 30.9 percent (including an education tax). The top corporate tax rate is 34.6 percent. The overall tax burden equals 16.6 percent of total domestic income. Government spending has amounted to 27.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 7.3 percent of GDP. Public debt is equivalent to 67.2 percent of GDP.
The regulatory framework is burdensome, and the legal framework is weak. Labor regulations continue to evolve, and the informal economy is an important source of employment. Although the IMF reported in 2016 that India’s “major subsidies” (e.g., on fuels and fertilizer) dropped below 2 percent of GDP, the government is introducing a new basic foods subsidy for around two-thirds of the population.
Trade is moderately important to India’s economy; the value of exports and imports taken together equals 49 percent of GDP. The average applied tariff rate is 6.2 percent. Foreign investment is screened, but ownership restrictions in some economic sectors have been reduced. State-owned enterprises distort the economy. Despite some liberalization and modernization, state-owned institutions dominate the banking sector and capital markets.