One of the fastest-growing economies
India is located in South Asia on the Indian subcontinent, with a population of 1.4 billion people. India is the most populous democracy and a regional superpower with an increasingly prominent presence in global culture, as evidenced by the expansion of Bollywood. India is a federal republic consisting of 28 states and seven territories. Following independence from Great Britain in 1950, India was relatively poor. Economic expansion, accelerated by liberalization in the 1990s, has made India a newly industrialized country.
Currently, India is the world’s sixth-largest economy. The economic growth averaged 7% per year. In 2022, GDP was $3.4 trillion ($2388 per capita). In the GDP structure, industry accounts for 25.6%, services for 48.6%, and agriculture for 16.6%. As for the business environment, micro, small, and medium-sized enterprises (SMEs) constitute 95.1% of all businesses. In recent years, the middle class has been growing. While the poverty rate has fallen to 16.4%, considerable inequality exists in the country.
India is the world’s third-largest greenhouse gas emitter, after China and the United States, accounting for 7% of global carbon dioxide emissions. According to the government, India will achieve net zero emissions by 2070. 50% of electricity needs will be met from renewable energy sources by 2030. The International Energy Agency (IEA) estimates that India needs to invest an average of $160 billion annually by 2030 to achieve these goals. It represents a threefold increase in investment in the energy transformation process.
Population of India
India has a population of 1.4 billion people. The largest ethnic groups are Hindi-speaking Hindi (41%), Bengalis (8.1%), Telugu (7.1%), Marathas (6.9%), and Tamils (5.9%). The largest religious groups are Hindus (79.8%), Muslims (14.2%), Christians (2.3%), and Sikhs (1.7%). The social hierarchy in some respects, particularly in rural regions, is still very much defined by the caste system. The official language is Hindi, one of 22 languages recognized by the constitution. English enjoys the subsidiary official language status, such as in business.
India’s population is relatively young – nearly 70% are aged 15-64. The labor force numbers about 524 million people. Currently, 36.4% of citizens live in cities. The largest is New Delhi, with a population of 32.9 million. Other major cities include Mumbai (21.2 million), Kolkata (15.3 million), Bangalore (13.6 million), and Chennai (11.7 million). The problem is high pollution levels. In 2022, India was home to six of the ten most polluted cities in the world, according to the IQAir organization.
Economy of India
India is a member of the G20 and the BRICS bloc, with Brazil, China, Russia, and South Africa. India has cooperated with the Organization for Economic Cooperation and Development (OECD) since 1995. The official currency is the rupee, which is divided into 100 paise. India has built up a diversified industry, with the most vital sectors being automotive, metallurgy, textile, clothing, pharmaceuticals, chemicals, petrochemicals, energy, and telecommunications. Outsourcing services, health care, and biotechnology have also flourished.
The environment is conducive to the development of agriculture. The sector employs 152 million people. They produce dairy products and grow grain, rice, vegetables, fruits, and industrial crops. India also has diverse mineral resources (coal, bauxite, chrome, magnesium, limestone, dolomite, kaolin, and gypsum). India is the third-largest importer of oil and the fifteenth-largest importer of natural gas. However, domestic production is growing steadily. Oil production increased from 6.8 million tons in 1970 to 29.7 million tons in 2022, and natural gas production from 1.5 million tons to 34 million tons.
In 2014, India launched the “Make in India” program to attract investment, facilitate economic operations, create additional jobs, and strengthen 25 core sectors of the economy. As a result, annual foreign direct investment has doubled to $83 billion by 2022. In 2015 the government launched the Smart Cities Mission project to connect India’s 100 largest cities. Bangalore, dubbed “Asia’s Silicon Valley,” is a prime example. Under the program, so far, some 5,900 projects have been implemented, and about 2,100 projects are underway.
International trade
India is the world’s sixth-largest economy by GDP, the 16th largest exporter, and the 10th largest importer. Indian exports are worth $394.8 billion, and imports are $570.4 billion. India’s main trading partners are the United States, China, the United Arab Emirates, Hong Kong, Singapore, Saudi Arabia, Indonesia, Germany, Australia, Malaysia, Bangladesh, and the United Kingdom.
The group of most imported goods includes oil and mineral fuels (29.9%), precious stones and metals (15.5%), electrical equipment (9.94%), industrial machinery (8.49%), organic chemicals (4.78%), plastics (3.38%), fats and oils (3.06%), iron and steel (2.05%), precision instruments (1.98%), and inorganic chemicals (1.69%). In addition, imports include fertilizers, chemical products, copper, motor vehicles and parts, ores, iron and steel articles, and rubber.
Among the most exported goods are oil and mineral fuels (14.3%), precious stones and metals (9.66%), industrial machinery (6.12%), organic chemicals (5.37%), iron and steel (5.37%), medicines (4.93%), motor vehicles and parts (4.79%), electrical machinery (4.77%), cereals (3.13%), and cotton (2.54%). Other goods are aluminum, plastics, iron and steel articles, clothing, seafood, textiles, chemical products, ores, ships and boats, rubber, and sugar.
Trade agreements
India has an extensive network of trade relations and cooperates on preferential market access with more than 50 countries. Cooperation also takes place through multilateral agreements such as the South Asian Free Trade Area (AFTA), the Asia-Pacific Trade Agreement (APTA), and the Global System of Trade Preferences (GSTP).
India has signed free trade agreements with the following countries:
Australia
Japan
Mauritius
Singapore
South Korea
Sri Lanka
Thailand
United Arab Emirates
Agreements with associations of countries:
Association of Southeast Asian Nations (ASEAN)
South Asian Association for Regional Cooperation (SAARC)
Southern Common Market (Mercosur)
India is currently negotiating agreements with Bangladesh, Canada, New Zealand, the United Kingdom, the European Union, the European Free Trade Area (EFTA), and the Gulf Cooperation Council (GCC), among others.
India-European Union relations
India and the European Economic Community established relations in 1962. They have been strengthened in subsequent years as trade has expanded. The 1994 EU-India Cooperation Agreement provided the legal framework for EU-India relations, and in 2004 the two sides entered a strategic partnership. In 2022, the European Union resumed negotiations with India on a free trade agreement, and in 2023 the two sides established the Trade and Technology Council (TTC).
The European Union is India’s third largest trading partner. In 2022 the EU exported 47.6 billion euros worth of goods to India, and the value of EU imports amounted to 67.6 billion euros. India is the EU’s 10th largest trading partner, accounting for 2.1% of the EU’s total goods trade. In services trade, on the other hand, EU exports amounted to €19.2 billion and imports to €20.7 billion. The European Union is also the top foreign investor in India. Its share in this area in 2021 was 96.1 billion euros. About 6,000 EU companies currently operate in India.
Opportunities and challenges
The Indian market is very open to investment. It represents a considerable opportunity for foreign entrepreneurs, but adequate expertise is required. Challenges include market specifics, consumer preferences, and different tax regimes in each state. Goods & Services Tax (GST) of 10% of their value is imposed on imported goods. There is also an integrated IGST tax and a GST Compensation Cess levied mainly on luxury goods. The main impediments are non-tariff barriers, arbitrary administrative decisions, and licensing requirements.
Opportunities are ongoing social developments, a growing middle class, and improvements in financial status. As consumer preferences change, they choose more expensive and better-quality products (branded clothes, cars, toys, household appliances, or electronic equipment). India’s development goals are also indicators for entrepreneurs planning to expand. In this regard, potential cooperation areas are primarily defense, mining, pharmaceutical, or space industries.
Given India’s dependence on imported energy resources and market size, opportunities emerge in the energy sector. Another factor for consideration is that India is one of the countries with a pivotal role in the global energy transformation. It implies that India will increase investment in renewable energy resources in the coming years and shift production to a more eco-friendly track. According to the International Energy Agency, low-carbon technologies such as renewable batteries and green hydrogen have the potential to create a market worth as much as $80 billion by 2030.