Gazdasági elemzések


Population 1,334.2 million
GDP 2,038 US$
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major macro economic indicators


  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 8.2 7.2 5.5 -8.0
Inflation (yearly average, %) 3.3 4.0 3.5 4.7
Budget balance (% GDP) -3.9 -3.6 -3.5 -10.0
Current account balance (% GDP) -1.5 -2.5 -2.5 -0.3
Public debt (% GDP) 67.8 68.1 69.0 80.0

(e): Estimate. (f): Forecast. FY 2020 runs from April 1, 2020 to March 31, 2021.


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


  • High corporate debt and non-performing assets (NPA)
  • Net importer of energy resources
  • Lack of adequate infrastructure
  • Weak public finances
  • Bureaucratic red tape
  • Uncertainties over the Kashmir issue


The worst growth contraction in Asia

The economy is set to experience the worst contraction in Asia in 2020, on the back of stringent containment measures imposed to contain the COVID-19 spread, which have exacerbated pre-existing headwinds. Private consumption (65% of GDP) will be sluggish this year, as unemployment soared following the implementation of the nationwide lockdown. The restrictions sent millions of migrant workers back to the rural areas, as jobs in cities were lost due to the implemented measures. These movement restrictions have also hampered private consumption. Meanwhile, credit condition has worsened and limited further private investment. An increase in banks’ non-performing loan (NPL) ratios is expected. Standing currently at 9.1%, the NPL ratio is set to increase, as SMEs were under strain during the lockdown. Moreover, the six-month extension on loan guarantees announced by the central state will further add to pressures on India’s state lenders. As a result, banks and shadow lenders might constrain credit conditions when access to credit is most needed to restart the economy. Weaker investment added on top of mobility restrictions will translate into fewer jobs, with unemployment levels reaching records in August, according to the Centre of Monitoring Indian Economy (CMIE).

Inflation is expected to remain slightly above the Reserve Bank of India’s (RBI) 2-6% target range, due to floods in eastern India, higher telecom charges post-COVID-19, domestic taxes on petroleum products and a surge in gold prices. Because of concerns over inflation, the RBI might not be able conduct additional rate cuts (since the last 40bps rate cut in May) until the target range is reached. This could add pressure and risk on tighter domestic liquidity, as the government attempts to restart economic growth following strict lockdown measures, while COVID-19 cases continue to surge.


Public finances will deteriorate

The fiscal deficit is expected to rise, as the pandemic-induced restrictions continue to weigh on revenues. The deficit has already breached the full-year target of 3.5% of GDP since the beginning of the fiscal year in April. Revenues from the Goods and Services Tax (GST) were already disappointing, both because of weaker domestic consumption and also problems with collection. The lockdown implemented in March, which suspended all business activities and hampered domestic consumption, further deteriorating revenues. In the large stimulus package (10% of GDP) unveiled to restart the economy, half of the allocation concerns previously announced fiscal measures and the rest consists of government loan guarantees and credit extensions. This fiscal intervention will not be enough to support the economic recovery and tax collection should remain sluggish this year as a result.

The current account deficit will likely narrow, as imports dropped faster than exports. They should remain subdued, as the country is still grappling with COVID-19 infections and supply disruptions from the regional lockdowns in India. Foreign exchange reserves remain at comfortable levels (nearly 14 months of imports as of June), which would help the RBI to protect the rupee from depreciation, while the economic outlook is gloomy.


Modi’s BJP party has a majority, but support is dwindling

The alliance formed around Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) secured a landslide victory in the Parliamentary elections of May 2019 (349 out of 542 seats). Modi won his second election by focusing on job creation and investments in infrastructure, while tackling corruption and fostering the ideology of Hindu nationalism. Given the slow progress on the economic front, the BJP could ramp up the nationalist agenda, something that will not sit well with foreign investors, who are keen on secular policies. India needs to attract FDIs to plug its infrastructure gap, finance the current account deficit and boost potential growth. Tensions with neighbours intensified: with Pakistan over Kashmir, after Modi stripped the region of its semi-autonomous status in August 2019, and recently with China over a long border dispute that sparkled direct clashes at the borders this year.


Last updated: September 2020


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.