The Fundamentals of the Indian Economy

China is sometimes known as the Dragon, and India is known as the Elephant. The I in BRICS is India.

Today £1 buys you 101 Indian Rupees. It was only a few years ago (less than 24 months ago), when £1 bought you 80 Rupees. The decline in the Rupee by over 20% has been a major concern to the Indian economy as now foreign imports such as oil have become very expensive to the Indian market place.

The Indian Central Bank, known as The Reserve Bank of India [] has appointed the former IMF man, Dr. Raghuram Rajan as governor.

His book “Fault Lines” is an excellent read.


Today India has a population of 1.2 Billion, (1,200 Million). 65% of which are under 35, that equates to 780 Million people. This is a massive potential consumer base. Also in 2012 with Europe in recession, the Indian economy grew at 3.2%.

The average age of an Indian today is 26.
33 million land lines (fixed)
894 million mobile phones.

The economy is £1.2 trillion (£1200 Billion) = US$2 Trillion.
Only 2.5% of the population pays income tax.
Manufacturing only accounts for 14% of the economy.
It runs a trade deficit of 17% of GDP (massive imports and humble exports)
50% of the population work in agriculture (thus explaining why India has great food)
The service sector accounts of 50% of India’s economy, e.g. outsourcing and this employs over 25% of the workforce.

India has a middle class of over 200 million, who have disposable income and demand luxury items such as upmarket cars to branded clothes.
A comparison is made to the Chinese consumer. Today the average India consumer drinks 1% the amount of wine that a Chinese person consumes, another benchmark is the consumption of snacks, today an Indian consumer eats only 15% of what a Chinese consumer eats in snacks.

Thus the upside is massive. To see this in action, some Indian companies have a global brand and reputation:

Tata (who own Jaguar Land Rover, and Corus Steel, the old British Steel), Quinnox, Tech Mahindra, ICICI Bank, HDFC, Bajaj Auto, Vedenta Resources, Bharti Airtel, State Bank of India (largest number of bank branches in the world) Zee TV, Infosys, HCL Technologies, ArcelorMittal (the world’s largest steel maker), Godrej Group, Dr Reddy’s Laboratories of Hyderabad, Reliance Industries, Wipro,  and Bank of Baroda.

The Indian economy has massive potential.

1 thought on “The Fundamentals of the Indian Economy

  1. Saad Rahman

    The amount of diversity India possesses in my opinion becomes a hurdle to growth on many an occasion. All the differences in opinion lead to the ever so slow Indian bureaucracy which is known for its notoriously slow pace. I am not sure how India would overcome this hurdle but if it does, it would be much better in terms of economic growth.

    On Raghuram Rajan, he inspires confidence when he speaks. I think he is a very capable man for the job. But any measure that the Reserve Bank of India does take to improve growth has to be coupled with a swift bureaucracy, otherwise the effects of RBI’s measures will not bear much fruit.


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