• Key policy rate: 6.5% (October 2024)
• GDP growth rate: 6.7% (Q2 2024)
• Full-year GDP growth target: 6.5-7% (fiscal year April 2024-March 2025)
• Manufacturing Purchasing Managers’ Index reading: 57.5 (October 2024)
• Inflation rate:  6.21% (October 2024) 

India is currently the world’s most populous nation with over 1.4 billion people. It is also the fastest-growing major economy, according to the World Bank, with real GDP expanding by 8.2 per cent in their fiscal year 2023-2024. 

The services sector is the main driver of the Indian economy, accounting for 54 per cent of national output in the past two years. Financial, real estate, and professional services represent India’s largest business segment, with the country known as a global hub for business process outsourcing and information technology-enabled services. Meanwhile, manufacturing and construction led year-on-year expansions. India’s top exports are mineral fuels and oils; electrical machinery and parts; and precious metals, pearls, and stones. 

In terms of expenditure, private consumption accounts for 56 per cent of GDP, private investments contributed one-third of total output, and a tenth is driven by government spending. 

Strong economic growth has buoyed investor confidence towards India, as seen in the surging performance of Indian stocks and bonds so far in 2024. The benchmark S&P Bombay Stock Exchange Sensitive Index (BSE SENSEX) has gained more than 13 per cent year-to-date compared to end-2023, while yields on 10-year government-issued bonds are at two-year lows. The Indian bond market received a boost with its inclusion in both the JPMorgan and Bloomberg bond indices for emerging markets, expanding the country’s access to global financing.  

India, however, struggles with attracting greater foreign direct investment (FDIs), which has seen annual declines since 2021. More Indian entrepreneurs have also chosen to set up unicorn startups outside the South Asian economy than within it, reportedly due to a thick bureaucracy and inconsistent policies governing FDIs.

Since 2022, India has also been grappling with elevated inflation and a high level of public debt, although these risks are slowly dissipating.

House view: India is poised to remain at the frontier of global growth in the coming years especially with China’s economic slowdown. Sustaining this rapid economic expansion would require a substantial increase in foreign investment inflows to support business expansions. Lundgreen’s remains upbeat on the future of the Indian economy with its abundant skilled labour and large domestic consumer market.

Updated as of 20 November 2024