Event
On March 19th a key member of the United Progressive Alliance (UPA) coalition government, the Dravida Munnetra Kazhagam (DMK) party, announced that it would withdraw from the coalition in protest against the government's stance on human rights in Sri Lanka.
Analysis
The DMK's withdrawal is yet to be definitively confirmed, although the party-which holds 18 seats in the 543-member Lok Sabha (the lower house of parliament)-has said that its five ministers will resign from the federal cabinet soon. The UPA currently controls 248 seats in the Lok Sabha and enjoys confidence-and-supply arrangements with regional parties, which hold 47 seats between them, bringing its effective total to 295 members of parliament. Should the DMK make good its threat to leave, this tally would drop to 277 members.
As we have previously noted, the government's lack of a reliable parliamentary majority means that a far-reaching programme of fiscal consolidation and structural reforms is not in prospect before the next general election, which is due by May 2014. However, even if the DMK leaves the UPA, we do not expect elections to be called early-the Indian National Congress party, which leads the UPA, will be keen to avoid going to the polls amid an economic slowdown, and the main opposition Bharatiya Janata Party has made only limited progress towards preparing for an election campaign (for example, it has yet to anoint a prime ministerial candidate formally).
At the heart of the dispute with the DMK-a regional party from the Indian state of Tamil Nadu-is the government's stance towards Sri Lanka. India is expected to support a US-backed resolution being introduced next week at a meeting of the UN Human Rights Council that calls on the Sri Lankan government to do more to effect reconciliation with its ethnic minorities. However, the DMK wants the Indian government to support stronger wording in the resolution, such as terming the Sri Lankan administration's actions towards the end of the civil war as "genocide". The Indian government, while seeking to address the concerns of its own Tamil citizens, is simultaneously keen not to meddle in the affairs of another sovereign state.
March 19, 2013
Political outlook: Political forces at a glance
Present government: The United Progressive Alliance (UPA) coalition won a second five-year term at the April-May 2009 general election. The Indian National Congress party, which dominates the ruling coalition, won 206 of the 543 elected seats in the Lok Sabha (the lower house of parliament). The UPA lacks a majority in its own right, and relies on the support of minor and regional parties to achieve a 272-seat majority. Congress's main rival at national level, the Bharatiya Janata Party (BJP), performed poorly in the 2009 poll, as did Congress's communist erstwhile allies. The main opposition grouping in parliament, the BJP-led National Democratic Alliance, has lost the full support of some of its member parties since the general election.
Next election: A general election must be held by May 2014. The next presidential poll is due in 2017.
| Composition of Lok Sabha | |
| United Progressive Alliance (UPA; governing coalition) | 262 |
| Indian National Congress | 206 |
| All India Trinamool Congress | 19 |
| Dravida Munnetra Kazhagam | 18 |
| Nationalist Congress Party | 9 |
| National Conference | 3 |
| Jharkhand Mukti Morcha | 2 |
| Indian Union Muslim League | 2 |
| Kerala Congress (Mani) | 1 |
| All India Majlis-e-Ittehadul Muslimeen | 1 |
| Viduthalai Chiruthaigal Katchi | 1 |
| National Democratic Alliance (NDA) | 159 |
| Bharatiya Janata Party | 116 |
| Janata Dal (United) | 20 |
| Shiv Sena | 11 |
| Rashtriya Lok Dal | 5 |
| Shiromani Akali Dal | 4 |
| Telangana Rashtra Samithi | 2 |
| Asom Gana Parishad | 1 |
| Third Front | 74 |
| Left Front | 20 |
| Bahujan Samaj Party | 21 |
| Biju Janata Dal | 14 |
| All India Anna Dravida Munnetra Kazhagam | 9 |
| Telugu Desam Party | 6 |
| Janata Dal (Secular) | 3 |
| Haryana Janhit Congress | 1 |
| Fourth Front | 27 |
| Samajwadi Party | 23 |
| Rashtriya Janata Dal | 4 |
| Lok Janshakti Party | 0 |
| Other parties & independents | 21 |
| Total | 545 |
| Source: Election Commission. | |
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August 28, 2012
Official name
Republic of India
Form of state
Federal republic, with 28 states and seven union territories
Head of state
The president, Pranab Mukherjee, was elected in July 2012 for a five-year term by the members of the central and state legislatures
The executive
The prime minister presides over a Council of Ministers chosen from the elected members of parliament
National legislature
Bicameral. The Lok Sabha (the lower house) has 545 members-543 elected from single-member constituencies (79 seats are reserved for "scheduled castes" and 40 for "scheduled tribes"), and two representatives of Anglo-Indians appointed by the president. The Rajya Sabha (the upper house) has 245 members-233 elected by weighted votes of the elected members of parliament and the legislative assemblies of states and union territories, and 12 appointed by the president.
State legislatures
Unicameral or bicameral, with elected members; state governors are appointed by the president
Legal system
Based on the 1950 constitution and English common law
National government
The United Progressive Alliance (UPA), a coalition led by the Indian National Congress, won the largest number of seats in the April-May 2009 general election and formed a government
National election
The most recent Lok Sabha election was held in April-May 2009; the next is due by May 2014
Main political organisations
Indian National Congress; Bharatiya Janata Party (BJP); Trinamool Congress (TMC); Dravida Munnetra Kazhagam (DMK); Samajwadi Party (SP); Rashtriya Janata Dal (RJD); Janata Dal (United); Bahujan Samaj Party (BSP); All India Dravida Munnetra Kazhagam (AIADMK); Biju Janata Dal (BJD); Rashtriya Lok Dal (RLD); Nationalist Congress Party (NCP); Communist Party of India (Marxist), or CPI (M)
Prime minister: Manmohan Singh (Congress)
Key ministers
Agriculture: Sharad Pawar (NCP)
Chemicals: M K Alagiri (DMK)
Civil aviation: Ajit Singh (RLD)
Coal: Sriprakash Jaiswal (Congress)
Commerce & industry, textiles: Anand Sharma (Congress)
Communications & information technology: Kapil Sibal (Congress)
Defence: A K Antony (Congress)
External affairs: Salman Khurshid (Congress)
Finance: P Chidambaram (Congress)
Home affairs: Sushil Kumar Shinde (Congress)
Law & justice: Ashwani Kumar (Congress)
Petroleum & natural gas: Veerappa Moily (Congress)
Power: Jyotiraditya Scindia (Congress)
Railways: Pawan Kumar Bansal (Congress)
Rural development: Jairam Ramesh (Congress)
Urban development: Kamal Nath (Congress)
Central bank governor
Duvvuri Subbarao
January 03, 2013
Outlook for 2013-17
Review
January 03, 2013
Fact sheet
| Annual data | 2012 | Historical averages (%) | 2008-12 |
| Population (m) | 1,220 | Population growth | 1.2 |
| GDP (US$ bn; market exchange rate) | 1,872 | Real GDP growth | 5.9 |
| GDP (US$ bn; purchasing power parity) | 4,835 | Real domestic demand growth | 5.4 |
| GDP per head (US$; market exchange rate) | 1,535 | Inflation | 8.1 |
| GDP per head (US$; purchasing power parity) | 3,963 | Current-account balance (% of GDP) | -3.2 |
| Exchange rate (av) Rs:US$ | 53.4 | FDI inflows (% of GDP) | 2.2 |
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Background: India gained independence in 1947, after two centuries of British colonial rule. Partition at the same time created the state of Pakistan, with which India has fought three wars, two over the disputed territory of Kashmir. India is the second most populous country in the world, with more than 1.2bn people in 2010. Its economy is the 11th-largest in the world measured in nominal US dollars, but it is the third-largest when measured at purchasing power parity exchange rates. The large and inefficient public sector co-exists with a sizeable and diversified private sector.
Political structure: India has been a democracy since independence. The growing importance of regional parties has made coalition government the norm at federal level. Democratic procedures are, on the whole, respected. The prime minister is the leader of the government, requiring the support of a majority in parliament. The president is the head of state, and, although limited in executive power, can influence the formation of governments at both state and national levels when no party has gained an outright majority. The judiciary is formally independent and is becoming increasingly assertive.
Policy issues: India emerged from the 2009 global recession in better shape than most countries in Asia. However, the progress made in the boom years of the mid-2000s on cutting the fiscal deficit has been reversed, and the government needs to promote market-friendly policies. It will also need to make hard decisions on raising taxes. The return of rapid inflation is a major risk to macroeconomic stability.
Taxation: The top rate of both personal income tax and corporation tax for Indian companies is 30%. The corporation tax rate for foreign companies is 40%. However, a complex system of exemptions reduces the effective tax rate for Indian firms to less than 20%. All companies pay a 10% tax on distributed profits. Customs duties have been lowered substantially but remain high by international standards. The budget for fiscal year 2012/13 (April-March) included a proposal to amend the Income Tax Act to facilitate the taxation of crossborder acquisitions.
Foreign trade: India's trade deficit (in balance-of-payments terms) widened to US$168bn in 2011, from US$132bn in 2010, as both exports and imports recovered sharply following the 2008-09 global financial crisis. Exports increased by 36% in 2011, to US$307bn, while imports rose by 33% to US$475bn.
| Major exports 2011/12 | % of total | Major imports 2011/12 | % of total |
| Engineering goods | 22.0 | Petroleum & petroleum products | 31.7 |
| Petroleum products | 18.3 | Gold & silver | 12.5 |
| Gems & jewellery | 15.4 | Electronic goods | 6.7 |
| Textiles & textile products | 9.2 | Non-electrical machinery | 6.2 |
| Leading markets 2011 | % of total | Leading suppliers 2011 | % of total |
| UAE | 12.6 | China | 11.0 |
| US | 11.0 | UAE | 7.6 |
| China | 6.1 | Saudi Arabia | 5.3 |
| Singapore | 5.2 | US | 4.6 |
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March 06, 2013
Data and charts: Annual trends charts
January 03, 2013
India: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: The embattled Indian National Congress-led United Progressive Alliance (UPA) coalition government is being swamped by a series of high-profile corruption scandals. Moreover, Congress's bias towards prioritising its political survival over good government in the past year has resulted in policy paralysis. In September, in an attempt to respond to its critics and reverse India's economic slowdown, the government unveiled a series of long-awaited economic reforms. The political fallout from the introduction of these measures was immediate, with one of the coalition's key parties, the Trinamool Congress, withdrawing its 19 members of parliament (MPs) from the ruling coalition in protest. This has left the UPA five seats short of a majority in the Lok Sabha (the lower house of parliament). Yet the government is unlikely to be in imminent danger, as it has confidence-and-supply arrangements with two regional parties, the Bahujan Samaj Party (BSP) and the Samajwadi Party (SP), which have 43 MPs between them.
ELECTION WATCH: The next general election is due by May 2014. Although the government's waning popularity and lack of a working majority in parliament have raised the possibility of an early poll, we expect the UPA coalition to complete its term. This is largely because the opposition is weak and divided and is therefore in no position to mount a strong challenge. Given the growing strength of regional and caste-based parties in India, the 2014 election is certain to return another coalition government, which is likely to be led by either Congress or the BJP.
INTERNATIONAL RELATIONS: In the past year relations between India and Pakistan have experienced a slight thaw, with modest progress being made on the liberalisation of the movement of people and goods across the border. However, domestic political concerns will continue to preoccupy leaders in both countries, harming prospects for compromise. Crossborder terrorism and the dispute over Kashmir (which both India and Pakistan administer in part but claim in full) will remain central issues in relations between the two countries. India is expected to play an increasingly important role in Afghanistan, particularly following the withdrawal of international forces from that country in 2014. The ongoing deepening of ties between India and Afghanistan is perceived by many Pakistanis as a threat to their country, raising the possibility that some elements in Pakistan may seek to destabilise India. However, Indo-Pakistani relations are expected to remain broadly stable, with no outbreak of hostilities, but no significant breakthroughs either.
POLICY TRENDS: Efforts to implement structural economic reform will continue to be hindered by the government's lack of a reliable parliamentary majority in the period preceding the next general election, which must be held by May 2014. After several false starts, the government announced a series of reforms last September aimed at tackling India's burgeoning fiscal deficit and creating new jobs. These include the raising of administered fuel prices and the liberalisation of restrictions on foreign investment in leading sectors. However, priority will also be given to populist measures as the general election approaches. Even in the event that the BJP (which is considered to be more business-friendly than Congress) forms the next coalition government, the pace of reform in 2014-17 will be slowed by coalition politics and opposition from vested interests.
ECONOMIC GROWTH: Real economic growth (on an expenditure basis) has been disappointing so far in 2012/13: in the first two quarters of the fiscal year (April-March) real GDP expansion averaged 3.4% year on year. A slowdown in growth in private consumption (which accounts for more than one-half of nominal GDP) is particularly worrying: high-frequency data, including figures for vehicle sales and retail sales, indicate that private consumption growth is likely to remain weak during the remainder of this year. As a result, we have lowered our forecast for real GDP growth in 2012/13 to 5.4%, from 5.8% previously. This will mark a significant slowdown from the growth rate of 6.9% recorded in the previous year. Growth in private consumption is forecast to decelerate from 5.5% in 2011/12 to 4.1% in 2012/13. Weak business and investor confidence will limit investment growth, which will slow to 4.4% in 2012/13, from 5.6% in the previous year. India is better insulated from international trends than many other emerging-market economies, but weak demand in the EU will continue to hamper the country's export growth and serve as an additional constraint on investor enthusiasm.
INFLATION: Despite a slight easing of wholesale prices in November 2012 (when inflation slowed to 7.2% year on year), consumer price inflation, at 9.9% that month, remains elevated. The weakness of the rupee, the government's persistent fiscal deficit and supply-side shortages will continue to place upward pressure on prices despite the slowdown in economic expansion. The government will also need to address its burgeoning subsidy bill (for food and fuel) in the near term, and its efforts in this regard could push up food and fuel costs. The food component carries a weighting of around one-half in the consumer price index (and around one-quarter in the wholesale price index), meaning that food price rises will remain a crucial determinant of inflation in 2013-17. Some of these factors will moderate in 2013, and the average rate of consumer price inflation will consequently slow to 8.2%, from an estimated 9.2% in 2012. Wholesale price inflation will prove more stubborn, at 7.3% on average in 2013, compared with an estimated 7.6% in the previous year. In 2014-17 we expect a further slight moderation in the rate of inflation, with wholesale prices increasing by 6.9% a year on average and consumer price rises averaging 7.5% annually. However, any surge in international oil prices or a failure of the monsoon in India (which would reduce food supplies and thus push up food prices) could cause inflation to exceed our forecasts.
EXCHANGE RATES: After depreciating by an estimated 12.5% in 2012 on the back of widening fiscal and trade deficits, the rupee is forecast to strengthen slightly during the forecast period, from an estimated average of Rs53.3:US$1 in 2012 to Rs48:US$1 in 2017. The rise in the currency's value will be driven primarily by strong inflows of foreign investment, attracted by India's bright economic prospects. The current-account deficit is not expected to pose a threat to the rupee, as it is forecast to average a modest 2.7% of GDP in 2013-17. Given the expected relatively rapid rate of price increases in the forecast period, the rupee's nominal strengthening will represent a substantial appreciation in real terms, amounting to 7.4% a year over the next five years. Our forecast is thus subject to downside risks: portfolio investment flows remain inherently volatile, inflation could surge, or the government could suffer a fiscal crisis. Any of these developments could trigger a depreciation of the rupee.
EXTERNAL SECTOR: The current-account deficit, which is estimated to have reached the equivalent of 4.2% of GDP in 2012, is forecast to narrow steadily in the forecast period, to stand at 2.2% in 2017. The improvement will be driven by rapid growth in nominal GDP. India will continue to suck in merchandise imports, with growth in imports forecast to average 14.1% a year in 2013-17. Exports are forecast to rise even faster, at 17.5% a year. However, given the substantially higher base for imports, the merchandise trade deficit is forecast to widen to US$289bn in 2017, from an estimated US$197bn in 2012. Services exports will retain their vital role in external trade, as information technology and business-process outsourcing continue to lure Western firms to India. Services exports are projected to record average annual growth of 12.7% in 2013-17, pushing up the services surplus to US$113bn by 2017, from an estimated US$68bn in 2012. The income deficit, which is small at present, will widen steadily, to reach US$35bn by 2017, reflecting an increase in the repatriated profits of foreign companies operating in India. The current transfers surplus will rise over the forecast period, to reach US$109bn in 2017, owing to strong growth in remittances from Indian workers overseas.
January 07, 2013
Country forecast overview: Highlights
Country forecast overview: Key indicators
| Key indicators | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| Real GDP growth (%; fiscal years beginning Apr 1st) | 5.2 | 6.5 | 7.3 | 7.3 | 7.5 | 7.5 |
| Consumer price inflation (av; %) | 9.3 | 8.8 | 8.0 | 7.0 | 6.6 | 7.1 |
| Budget balance (% of GDP; fiscal years beginning Apr 1st) | -5.4 | -5.0 | -4.5 | -4.2 | -4.0 | -3.8 |
| Current-account balance (% of GDP) | -4.8 | -4.1 | -3.4 | -3.0 | -2.7 | -2.5 |
| Lending rate (av; %) | 10.6 | 9.7 | 9.1 | 9.0 | 8.8 | 8.8 |
| Exchange rate Rs:US$ (av) | 53.4 | 52.8 | 50.9 | 49.7 | 48.3 | 48.0 |
| Exchange rate Rs:¥100 (av) | 66.8 | 56.9 | 53.9 | 51.6 | 49.6 | 49.7 |
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March 06, 2013
Land area
3,287,263 sq km (including Indian-administered Kashmir); of the total, 57% is agricultural land and 16% is forest area
Population
1.21bn (March 2011; provisional estimate from 2011 census)
Main towns
Population in millions of metropolitan areas/regions, 2011 census:
New Delhi: 21.8
Mumbai (Bombay): 20.8
Kolkata (Calcutta): 14.6
Chennai (Madras): 8.9
Bangalore: 8.7
Hyderabad: 7.7
Climate
Varied; humid subtropical in Ganges basin, semi-arid in the north-west, tropical humid in north-east and most of the peninsula, tundra in the Himalayas; all areas receive rain from the south-west monsoon in June-September; the south is also served by the north-east monsoon in January-March
Weather in New Delhi (altitude 218 metres)
Hottest month, May, 26-41°C (average daily minimum and maximum); coldest month, January, 7-21°C; driest month, November, 4 mm average rainfall; wettest month, July, 180 mm average rainfall
Languages
Hindi is the national language and the primary tongue of 30% of the population. There are 14 other official languages: Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi and Sanskrit. English is widespread in business circles and as a second language
Religions
Hindu (80.5% in 2001 census); Muslim (13.4%); Christian (2.3%); Sikh (1.9%); Buddhist (0.8%); Jain (0.4%)
Measures
Metric system. Numbers are often written in lakhs (100,000) and crores (10m)
Currency
Rupee (Rs); Rs1 = 100 paisa. Average exchange rate in 2011: Rs46.7:US$1
Fiscal year
April 1st-March 31st
Time
5 hours 30 minutes ahead of GMT
Public holidays
Republic Day (January 26th); Independence Day (August 15th); Mahatma Gandhi's birthday (October 2nd); also major Hindu, Muslim, Christian and other religious holidays
January 03, 2013