Country Report India September 2022

________________________________________________________________________________
Country Report
India
Generated on September 18th 2022

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Symbols for tables

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India 1
India
Summary
2 Briefing sheet
Outlook for 2022-26

4 Political stability
4 Election watch
5 International relations
5 Policy trends
6 Fiscal policy
6 Monetary policy
6 International assumptions
7 Economic growth
7 Inflation
8 Exchange rates
8 External sector
9 Forecast summary
10 Quarterly forecasts
Data and charts

11 Annual data and forecast
12 Quarterly data
13 Monthly data
14 Annual trends charts
15 Quarterly trends charts
16 Monthly trends charts
17 Comparative economic indicators
Summary
17 Basic data
19 Political structure
Recent analysis
Economy
22 Forecast updates
25 Analysis
Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

India 2
Briefing sheet
Editor: Jubin Alphonse
Forecast Closing Date: August 23, 2022
Political and economic outlook

The Indian economy is one of the largest in the world. Services make up the bulk of GDP, with
the country specialising in information technology services. The implementation of labour
reforms will gradually improve manufacturing competitiveness.
The coalition government led by the Bharatiya Janata Party will serve out its full term until 2024.
Its large majority in the lower house and strong position in the upper house, as well as the
weakness of the opposition, will support political stability. Structural reforms will trigger
protests, but these will not be sufficient to unseat the government.
The government will maintain a focus on infrastructure development (within limited fiscal
space), while backing liberalisation and privatisation to support economic growth. EIU
forecasts public debt to remain around the equivalent of 60% of GDP in 2022-26, but most of it
will be held locally, and debt servicing will not be a cause for concern.
We forecast that real GDP will grow by 6.9% in fiscal year 2022/23 (April-March), following
8.8% growth in 2021/22. Government investment and the renewal of economic activity will
bolster growth, but inflation will dampen consumption. Economic activity will be suppressed by
higher borrowing costs in 2023/24-2025/26 but will rebound from 2026/27.
We expect the Reserve Bank of India (RBI, the central bank) to raise its policy rate by a
cumulative 190 basis points in 2022, as it attempts to ease inflationary pressure. After more
modest increases in 2023, the RBI will cut a total of 100 basis points in 2024-25, in the context of
moderating economic growth and a national election in 2024.
India's external debt/GDP ratio of 20% is much lower than the emerging-market median of 53%,
and the covid-19 pandemic has not led to a massive accumulation of external debt. Significant
foreign-exchange reserves will support its repayment capacity.
While maintaining its traditional foreign policy of non-alignment, India will reduce reliance on
Russia and develop defence synergies with its partners in the Quad, an informal diplomatic
grouping that also includes Australia, Japan and the US.
Key indicators
2021a 2022b 2023b 2024b 2025b 2026b
Real GDP growth (%)c 8.8 6.9 5.1 4.5 5.7 5.2
Consumer price inflation (av; %) 5.1 7.0 5.2 4.3 4.4 3.8
Government balance (% of GDP)c -6.7 -6.6 -6.0 -5.6 -5.1 -4.5
Current-account balance (% of GDP)d -1.1 -1.5 -1.4 -1.4 -1.2 -0.9
Short-term interest rate (av; %) 3.8 5.2 6.5 6.1 5.6 5.4
Unemployment rate (%) 8.0e 7.2 6.9 7.1 6.8 6.6
Exchange rate Rs:US$ (av) 73.92 79.05 82.40 83.50 85.40 87.50
a Actual. b EIU forecasts. c Fiscal years (beginning April 1st of year indicated). d Based on average
exchange rate in fiscal year beginning April 1st. e EIU estimates.

India 3
Key changes since July 22nd

We now expect monetary policy to be tightened more aggressively than we previously
anticipated. We forecast that the policy interest rate will rise by a cumulative 190 basis points in
2022, instead of the 160 basis points we previously expected.
A normal monsoon has prompted us to revise down our consumer price inflation forecast for
2022 from 7.3% to 7%. Better than expected rainfall will help to dampen food price inflation in
the final months of this year.
The month ahead

September 12th—Consumer price inflation (August): Consumer prices rose by 6.7% year on
year in July. We expect consumer price inflation to accelerate during August, as elevated food
and fuel prices (resulting from supply disruption) continue to drive up the cost of living.
September 12th—Industrial production (July): Industrial output expanded by 12.3% year on
year in June. Industrial production growth is expected to accelerate further in July, amid a
softening of input cost inflation and a strengthening of demand.
Major risks to our forecast

Scenarios, Q2 2022 Probability Impact Intensity
Very
Internet disruption affects business operations Moderate 15
high
The BJP's strong legislative majority undermines political checks and
High Moderate 12
balances further
Very
A serious conflict breaks out between India and Pakistan Low 10
high
India 4
Very
Tensions between India and China escalate to a military conflict Low 10
high
Very
The banking sector faces a systemic crisis Low 10
high
Note: Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential
developments that might substantially change the business operating environment over the coming two
years. Risk intensity is a product of probability and impact, on a 25-point scale.
Source: EIU.
Outlook for 2022-26

Political stability
EIU expects the ruling Bharatiya Janata Party (BJP) to complete its full term in office, which is due
to expire in 2024, bolstered by its majority in the Lok Sabha (the lower house of parliament). India's
prime minister since 2014, Narendra Modi, will remain the dominant political figure. The deep-
seated influence of Mr Modi (and the BJP) and the lack of an effective national political
opposition limit the risks to political stability.
The decline in the vote share of the Indian National Congress at state and national elections over
the past five years has diminished its effectiveness as the principal national opposition party, and
this trend will not be reversed in 2022-26. An emerging trend of regional parties becoming strong
competitors to the BJP at state-level elections will continue over our forecast period.
The government increased its strength in the Rajya Sabha (the upper house), with the help of
coalition allies, as a result of victories in important state assembly elections held in the first half of
2022 (state legislatures form the electoral college for the upper chamber). After farmer-led protests
in 2021 led to the reversal of agricultural liberalisation reforms announced the previous year, the
government will refrain from enacting controversial reforms such as land acquisition plans until
after the next national election in 2024. However, a victory in the election would return these
reforms to the government's agenda. This would spark protests, but this form of dissent will not
undermine political stability.
The BJP will intensify its Hindu nationalist agenda during 2023, in the run-up to the next general
election. As a result, intermittent religious and communal clashes will persist. Over the longer
term, increased interference in India's democratic institutions poses a risk to political stability.
Under Mr Modi, the authorities will maintain strong control over social and broader media.
The government will decide on elections for the centrally administered territory of Jammu and
Kashmir after the electoral roll is finalised (now due by November). Extremist organisations in
Kashmir will keep the threat of terrorist attacks in major cities elevated.
Election watch
The next general election will be held in May 2024, when the BJP will enjoy the advantages of
incumbency, a weak opposition and a strong electoral machine. We expect Mr Modi to remain the
BJP's candidate for prime minister, although his age may prevent him from serving out the entire
five-year term, and he may hand over the leadership to a party comrade. His opponent is likely to
be the de facto leader of Congress, Rahul Gandhi, who led the party against the BJP during the
latter's landslide electoral victory in 2019 and is widely unpopular among the electorate. Although
regional parties have a stronghold in several states, it is unlikely that they will be able to band
together successfully to challenge the BJP at national level.
An electoral college comprising members of state and central legislatures elected Droupadi
Murmu, the ruling party’s candidate, as the country's president in July 2022. The next presidential
election will be held in 2027, beyond our forecast period. Ms Murmu's selection will not have an
impact on policy decisions, as the president’s role will remain largely symbolic.

India 5
International relations
India has maintained a neutral stance over the Russia-Ukraine war, refraining from condemnation
of Russia. This position has been dictated by India's historically strong diplomatic relations with
Russia and its traditional reliance on Russian defence equipment. Although this caused some
consternation with India's partners in the Quad (an informal diplomatic grouping with the US,
Australia and Japan), cordial relations have largely been maintained. Given the geographical and
strategic importance of India's role in the Quad, differences over Russia will not deter closer co-
operation, although we believe that the expansion of security ties within the grouping will be
slow. The Indo-Pacific Economic Framework announced by the Quad leaders in May lacks a
concrete agenda so far. Nevertheless, we believe that India will reduce its reliance on Russia by
diversifying its sources of defence imports. The main beneficiaries of this diversification will be
the US and France, from where defence acquisitions had already been stepped up before the
Ukraine war.
Bilateral relations between India and China will remain tense. India's preference to resolve border
disputes before engaging on wider issues has not been met with enthusiasm from China, even as
the latter attempted to resume engagement with India in April 2022. The China-Pakistan Economic
Corridor infrastructure project will also undermine relations. Both sides have increased the
deployment of heavy weaponry near the border, raising the risk of military clashes in 2022-26,
although a full-blown conflict is outside our core forecast.
India and Pakistan (with Shehbaz Sharif as prime minister) will attempt to resume engagement.
However, any major improvement in the currently strained relationship is unlikely during our
forecast period, as cross-border terrorism and the decades-long sovereignty dispute over Kashmir
remain major hurdles. India's relations with Muslim-majority countries have deteriorated after
controversial remarks by a former BJP spokesperson resulted in wide condemnation. However, we
expect the impact to be moderate, as India remains a crucial commercial partner for those
countries.
Policy trends
The government will prioritise fostering a sustained economic recovery in 2022. Infrastructure
development will remain its focus; this will encompass the creation and upgrade of ports, logistics
parks, roads and railway networks. Logistics costs will decline gradually over the forecast period,
with major roads and freight corridors due for completion in 2023-24. However, steep increases in
land acquisition and input costs have delayed construction in 2022 and will pose a high risk to the
timely execution of projects. India is also likely to make gradual progress toward its climate goals
in the latter part of the forecast period.
The administration will make only piecemeal changes to legislation related to commerce and
regulatory requirements in 2023. The liberalisation of land-acquisition laws will be an area of
attention for the improvement of the business environment, but major progress in this area is
unlikely before the national election in 2024, as it might provoke widespread protests from the
farming and tribal communities. The government will also attempt to improve the quality of
budgetary expenditure, which was one of the reasons behind a change in the armed forces'
recruitment policy in June 2022. We expect the government to be moderately successful in
privatising state-owned enterprises (SOEs), even as it faces lukewarm interest from the private
sector.

India 6
Fiscal policy
The budget for fiscal year 2022/23 (April-March) strives to improve the quality of government
expenditure, with a focus on significant capital spending geared towards defence, energy,
telecommunications, transport and infrastructure. However, reduced duties on fuel and increased
fertiliser subsidies will cost the exchequer an additional Rs2trn (US$25.3bn). The rate of a windfall
tax on petroleum companies was cut in July 2022, shortly after its introduction at the start of that
month. We expect the government to cut back modestly on some capital expenditure on
infrastructure to compensate in part for the cost of subsidies. However, the shortfall on the
budget balance will stand at the equivalent of 6.6% of GDP.
Expenditure commitments will remain elevated in 2023/24, owing to spending related to the
national election, resulting in only a modest fiscal consolidation. The government will attempt to
consolidate the public finances more quickly after the election, resulting in the budget deficit
narrowing to 4.5% of GDP in 2026/27. This will also be helped by measures to widen the tax net
and the strengthening of compliance norms. Rising interest rates will raise the costs of debt
servicing, and public debt will remain significant, averaging 58.6% of GDP in the forecast period.
Most of this will still be held domestically, reducing currency risks associated with external debt
repayment. However, the federal fiscal picture does not reflect the true size of the deficit: the
states' deficits and the liabilities of public-sector units represent an implicit fiscal burden on the
central government.
Monetary policy
The Reserve Bank of India (RBI, the central bank) began to tighten monetary policy to curb
inflationary pressure in May 2022; it raised its policy interest rate, the repo rate, by a total of 140
basis points between May and August. The pace of monetary policy tightening has been faster
than anticipated. We therefore believe that the central bank will raise interest rates more
aggressively than we previously expected, as inflation will exceed its target for the remainder of
2022. We forecast the RBI to raise the repo rate to 5.9% by the end of the year.
We expect the policy rate to be raised by a further 30 basis points during 2023, as consumer price
inflation will remain high (albeit moderating from 2022). This will bring the policy rate to 6.2% at
the conclusion of the tightening cycle at end-2023. The RBI will switch to cutting policy rates over
2024-26, totalling 100 basis points, to support the domestic economy. These cuts will bring the
policy rate to 5.2% at end-2026, which is not high by historical standards.
International assumptions
2021 2022 2023 2024 2025 2026
Economic growth (%)
US GDP 5.7 1.7 1.2 1.7 2.0 2.1
OECD GDP 5.2 2.4 1.0 1.8 1.9 2.0
World GDP 5.7 2.8 2.1 2.6 2.8 2.7
World trade 10.9 3.9 3.3 3.7 3.6 3.6
Inflation indicators (% unless otherwise indicated)
US CPI 4.7 8.1 3.8 1.6 2.1 2.1
OECD CPI 3.6 8.7 4.9 2.6 2.4 2.2
Manufactures (measured in US$) 5.8 2.0 4.3 3.9 3.2 1.8
Oil (Brent; US$/b) 70.4 102.0 91.7 85.9 78.3 69.1
Non-oil commodities (measured in US$) 38.0 15.9 -11.1 -6.2 6.2 -3.6
Financial variables
US$ 3-month commercial paper rate (av; %) 0.1 1.7 3.4 2.7 2.6 2.6
¥ 3month money market rate (av; %) 0.1 0.0 0.1 0.1 0.1 0.1
Exchange rate: ¥:US$ (av) 109.8 130.4 131.6 123.9 119.1 117.8
Exchange rate: Rs:US$ (av) 73.9 79.1 82.4 83.5 85.4 87.5
Exchange rate: US$:€ (av) 1.18 1.06 1.11 1.18 1.21 1.23

India 7
Economic growth
We forecast that real GDP will grow by 6.9% in 2022/23, decelerating from 8.8% in 2021/22. Growth
will benefit from the release of pent-up demand for contact-based services, especially in the
context of recovered mobility. This has improved business confidence, while strong corporate
earnings over the past few quarters will spur investment in sectors such as transport, information
technology and pharmaceuticals. A favourable monsoon and better terms of trade for food will
support rural incomes and consumption. Low inventories will keep construction momentum
strong, especially for commercial real estate. We expect monetary conditions to remain loose
despite rate increases over 2022-23, as policy rates will remain low by historical standards and are
unlikely to deter a recovery in investment. We expect higher interest rates and an anticipated
global slowdown in growth to pose downside risks to private investment growth in 2023. The
government’s capital spending budget will support infrastructure investment.
Factors that will weigh on growth in 2022/23 include a surge in raw material prices squeezing the
profit margins of manufacturers and service providers. The pass-through of these higher prices to
consumers will raise inflation and erode household purchasing power. Slower global growth over
2023 will also mean lower external demand for India’s exports.
In the medium term, the privatisation of SOEs and progress on structural reform, such as changes
to labour laws and strengthening manufacturing performance through investment incentive
schemes, will provide support for economic growth. Nevertheless, the weakening of household
and corporate balance sheets, due to the pandemic and inflationary pressures, will weigh on
expansion, as will the government's attempts to limit expenditure growth to consolidate the fiscal
account. We expect economic growth in 2023/242026/27 to average 5.1% per year—slower than
the annual average of 6.7% in 2015/16-2019/20.
Economic growth
(%; fiscal years beginning Apr 1st) 2021a 2022b 2023b 2024b 2025b 2026b
GDP 8.8 6.9 5.1 4.5 5.7 5.2
Private consumption 8.0 7.3 6.7 6.6 6.0 6.9
Government consumption 3.0 6.0 5.8 3.2 3.8 4.3
Gross fixed investment 15.7 7.5 6.7 6.0 6.3 6.1
Exports of goods & services 24.5 10.4 9.7 5.2 5.4 6.3
Imports of goods & services 35.5 13.9 9.3 10.3 8.4 6.6
Domestic demand 11.3 8.0 5.7 6.2 6.2 5.5
Agriculture 3.0 3.4 4.4 3.4 4.4 4.1
Industry 10.3 6.6 5.5 5.2 5.6 5.9
Services 8.4 7.3 5.0 5.0 5.1 6.4
a Actual. b EIU forecasts.
Inflation
We have revised down our consumer price inflation forecast for 2022, as the duty reduction on
retail fuels will cool transport price inflation modestly in the final months of the year. A normal
monsoon is also expected to contribute to a good harvest, which will help to contain food price
inflation. We now forecast consumer prices to increase by an average of 7% in 2022. Higher
commodity prices in the wake of the Ukraine crisis will continue to be passed on to consumers as
the recovery in demand becomes more broad-based. Increased demand for discretionary services
such as travel and recreation will create price pressures as well.
Consumer price inflation is expected to average 4.4% in 2023-26, near the midpoint of the RBI's 2-
6% target band. Moderate economic growth over this period will reduce demand-side inflationary
pressure. The enhancement of logistics infrastructure is also expected to improve supply-chain
efficiency. Given heavy reliance on seasonal rains for irrigation, a bad monsoon (which is not part
of our forecast) would trigger a surge in food prices.
We forecast that producer price inflation will average 13.8% in 2022, accelerating from 10.8% in
2021. This relates to high input costs generated by robust commodity prices and supply
disruption. Producer price inflation will average 5.6% in 2023-26.

India 8
Exchange rates
In the second half of 2022, some support for the currency will come from robust economic
performance, as well as significant policy rate increases by the RBI. Overall, we expect the rupee
to depreciate in nominal terms against the US dollar by 6.5% on average in 2022, with the currency
standing at Rs81.4:US$1 at the end of the year, compared with Rs74.3:US$1 at end-2021.
The Indian rupee depreciated nominally by 5.5% against the US dollar between January and July
2022, reflecting a narrowing interest-rate differential with the US and geopolitical contagion from
the Ukraine war, which has reduced the appetite for emerging-market assets. As a consequence,
the RBI has intervened heavily to slow the depreciation of the rupee by selling its foreign-
exchange reserves. This is likely to continue during the remainder of 2022, with the central bank
keen to prevent disorderly movement in the rupee:US dollar exchange rate. We believe that the
RBI has enough reserves to defend the currency this year and next without compromising its
ability to meet import payments or the repayment of external debt.
We forecast that the interest-rate differential with the US and a persistent current-account deficit
will keep the local currency on a depreciatory trend. We expect the rupee to depreciate gradually
between 2023 and 2026, moving from an annual average of Rs82.4:US$1 to Rs87.5:US$1 over that
period, as portfolio investment flows are depressed in part by divergent monetary policy settings
in developed markets, where policy rates are expected to remain unchanged in the latter part of the
forecast period.
External sector
The current account will remain in the red throughout the forecast period, primarily because of a
persistent goods trade deficit. The deficit on the goods trade account is likely to have widened in
2022 on the back of high import prices, as well as an increase in volumes. In 2023-26 sustained
domestic demand, along with relatively high global commodity prices, will ensure that goods
import values continues to exceed goods exports.
The services and secondary income accounts will remain in surplus throughout the forecast
period, as India maintains its status as a leading exporter of IT services and continues to receive
robust financial inflows from overseas Indians. However, this will not be enough to counter the
large deficit on merchandise trade. As a result, the current account will remain in deficit in 2023-26,
averaging the equivalent of 1.2% of GDP.
Our forecast assumes that tariff and non-tariff barriers, as well as strategic import substitution
through incentive schemes under the government's "self-reliant India" initiative, will partly
depress the goods import bill. India will continue to prioritise bilateral trade though pacts with
friendly nations such as the UAE, the UK and Australia, and will continue to focus on bilateral
rather than regional trade agreements. The country's absence from regional trade alliances will
impede the government's efforts to establish the country as an export-orientated manufacturing
hub.
The Production Linked Incentive (PLI) scheme, rolled out by the government for the domestic
manufacture of electronics, pharmaceuticals, batteries and solar panels (among other products),
will attract inflows of foreign direct investment. The move to incentivise semiconductor
production under the PLI will, in the medium term, alleviate reliance on Chinese imports. A push to
upgrade national infrastructure, coupled with the size of the market and a modest increase in
access, will also create opportunities for foreign investors.

India 9
Forecast summary
Forecast summary
(% unless otherwise indicated)
2021a 2022b 2023b 2024b 2025b 2026b
Real GDP growthc 8.8 6.9 5.1 4.5 5.7 5.2
Industrial production growthd 12.7 7.0 5.1 5.4 5.6 6.5
Unemployment rate (av) 8.0e 7.2 6.9 7.1 6.8 6.6
Consumer price inflation (av) 5.1 7.0 5.2 4.3 4.4 3.8
Consumer price inflation (end-period) 5.6 6.7 4.7 4.4 3.9 3.7
Short-term interbank rate 3.8 5.2 6.5 6.1 5.6 5.4
Government balance (% of GDP)c -6.7 -6.6 -6.0 -5.6 -5.1 -4.5
Exports of goods fob (US$ bn) 402.4 500.0 582.2 633.4 663.0 686.1
Imports of goods fob (US$ bn) -579.1 -696.3 -776.5 -830.3 -860.4 -887.0
Current-account balance (US$ bn) -33.4 -49.7 -48.9 -52.8 -46.1 -39.1
Current-account balance (% of GDP) -1.1 -1.5 -1.4 -1.4 -1.2 -0.9
Total foreign debt (US$ bn; year-end) 611.6 e 630.3 646.9 662.8 670.7 677.9
Exchange rate Rs:US$ (av) 73.92 79.05 82.40 83.50 85.40 87.50
Exchange rate Rs:US$ (end-period) 74.30 81.43 84.78 84.88 86.78 88.88
Exchange rate Rs:¥100 (av) 67.34 60.64 62.63 67.41 71.73 74.31
Exchange rate Rs:€ (av) 87.48 83.95 91.26 98.11 103.33 107.63
a Actual. b EIU forecasts. c Fiscal years (beginning April 1st of year indicated). d Calendar year. e EIU
estimates.

India 10
Quarterly forecasts
Quarterly forecasts
2021 2022 2023
1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr
GDP
% change, quarter on quarter 1.6 -11.5 13.2 3.3 0.5 -1.2 1.8 2.6 1.8 1.6 0.0 0.9
% change, year on year 2.2 20.1 9.0 5.1 3.9 16.0 4.3 3.6 4.9 8.0 6.1 4.4
Private consumption
Government consumption
% change, quarter on quarter 6.7 -7.5 -2.8 7.8 3.4 -1.8 1.3 2.0 0.9 1.5 1.5 1.5
% change, year on year 20.4 -4.1 14.6 3.4 0.2 6.4 10.8 4.9 2.3 5.8 6.0 5.5
Gross fixed investment
% change, quarter on quarter 3.6 -15.1 22.3 -3.8 4.4 -6.5 6.5 7.4 -2.0 1.9 0.5 1.5
Exports of goods & services
% change, quarter on quarter 4.9 8.7 4.9 3.9 -1.7 1.4 4.4 5.0 4.1 1.8 0.2 1.2
Imports of goods & services
% change, quarter on quarter 17.0 -6.0 17.3 3.5 3.5 0.0 3.1 3.9 3.1 1.9 0.8 1.7
Domestic demand
Consumer prices
% change, quarter on quarter 0.5 1.8 1.0 1.6 1.8 2.7 1.1 1.1 1.2 1.2 1.2 1.1
Producer prices
% change, quarter on quarter 3.5 3.8 2.2 4.0 3.2 5.5 1.0 1.4 2.2 2.1 2.0 1.8
Exchange rate Rs:US$
Average 72.9 73.8 74.1 74.9 75.2 77.2 81.8 82.3 82.9 83.6 85.5 85.9
End-period 73.5 74.3 74.3 74.3 75.8 78.9 82.0 81.4 83.2 84.6 85.7 84.8
Interest rates (%; av)
Short-term interest rate 3.7 3.8 3.8 3.9 4.0 5.0 5.5 6.2 6.3 6.5 6.5 6.5
Long-term bond yield 6.3 6.3 6.3 6.5 6.8 7.3 8.2 7.9 8.0 7.9 7.9 7.8

India 11
Data and charts

Annual data and forecast
2017a 2018a 2019a 2020a 2021a 2022b 2023b
GDPc
Nominal GDP (US$ bn) 2,652 2,704 2,832 2,665 3,174 3,299 3,468
Nominal GDP (Rs bn) 170,917 189,089 200,806 197,795 236,459 265,610 288,339
Real GDP growth (%) 6.7 6.5 3.8 -6.7 8.8 6.9 5.1
Expenditure on GDP (% real change)c
Private consumption 6.2 7.1 5.2 -6.2 8.0 7.3 6.7
Government consumption 11.4 6.1 3.4 3.2 3.0 6.0 5.8
Gross fixed investment 7.8 11.3 1.5 -10.3 15.7 7.5 6.7
Exports of goods & services 4.5 11.9 -3.3 -9.4 24.5 10.4 9.7
Imports of goods & services 17.4 8.8 -0.8 -13.9 35.5 13.9 9.3
Origin of GDP (% real change)c
Agriculture 6.6 2.1 5.5 3.3 3.0 3.4 4.4
Industry 5.9 5.3 -1.4 -3.3 10.3 6.6 5.5
Services 6.3 7.2 6.3 -7.8 8.4 7.3 5.0
Population and income
Population (m) 1,354 1,369 1,383 1,396 1,408 1,417 1,429
GDP per head (US$ at PPP) 6,113 6,593 6,890 6,441 7,240 8,156 8,808
Fiscal indicators (% of GDP)c
Central government revenue 9.1 8.8 8.7 8.5 9.3 9.9 10.7
Central government expenditure 12.5 12.2 13.4 17.8 16.0 16.5 16.7
Central government balance -3.5 -3.4 -4.7 -9.2 -6.7 -6.6 -6.0
Net public debt 49.7 49.8 52.1 57.8 55.2d 55.7 57.5
Prices and financial indicators
Exchange rate Rs:US$ (av) 65.12 68.39 70.42 74.10 73.92 79.05 82.40
Consumer prices (av; % change) 3.3 3.9 3.7 6.6 5.1 7.0 5.2
Producer prices (av; % change) 3.5 4.3 1.9 0.5 10.8 13.8 8.4
Stock of money M1 (% change) 44.7 13.6 12.5 19.6 11.8 8.7 8.2
Stock of money M2 (% change) 10.0 10.2 10.4 12.4 9.8 7.8 6.9
Lending interest rate (av; %) 9.5 9.5 9.5 9.2 8.7 9.4 10.1
Current account (US$ m)
Trade balance -148,135 -186,692 -157,678 -95,450 -176,720 -196,315 -194,296
Goods: exports fob 304,107 332,088 331,271 281,546 402,425 499,960 582,250
Goods: imports fob -452,242 -518,780 -488,949 -376,996 -579,145 -696,275 -776,546
Services balance 75,924 80,773 84,226 87,107 102,681 106,012 103,993
Primary income balance -26,424 -29,757 -29,378 -32,044 -37,620 -41,218 -41,153
Secondary income balance 60,467 70,074 73,067 73,117 78,237 81,826 82,547
Current-account balance -38,168 -65,602 -29,763 32,730 -33,422 -49,695 -48,909
External debt (US$ m)
Debt stock 511,473 521,031 560,871 564,179 611,603d 630,347 646,864
Debt service paid 51,225 63,647 51,257 76,239 56,987d 67,473 72,777
Principal repayments 38,667 46,229 34,762 63,970 40,088d 43,049 41,838
Interest 12,558 17,417 16,495 12,269 16,899d
24,424 30,939
International reserves (US$ m)
Total international reserves 409,072 395,591 459,863 585,771 633,614 543,209 588,810
a Actual. b EIU forecasts. c Fiscal years (beginning April 1st of year indicated). d EIU estimates.
Source: IMF, International Financial Statistics.

India 12
Quarterly data
2020 2021 2022
3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr
Central government finance (Rs m)
Revenue 4,118 5,563 5,680 5,474 5,518 6,625 4,459 5,960
Expenditure 6,635 8,007 12,310 8,216 8,044 8,950 12,731 9,479
Balance -2,516 -2,445 -6,630 -2,742 -2,526 -2,325 -8,272 -3,519
Output
GDP at constant 2011/12 prices (Rs bn)a 34,148 36,586 37,172 32,884 37,216 38,443 38,626 n/a
Real GDP (% change, year on year) -6.1 0.5 2.2 20.1 9.0 5.1 3.9 n/a
Industrial production index (2011/12=100) 119.7 131.2 137.4 121.3 131.1 133.9 139.8 136.7
Industrial production (% change, year on
-5.7 1.7 6.0 44.4 9.5 2.1 1.8 12.7
year)
Prices
Consumer prices (2012=100) 154.4 156.9 157.7 160.6 162.2 164.7 167.7 172.3
Consumer prices (% change, year on
7.0 6.3 4.9 5.6 5.1 5.0 6.3 7.3
year)
Wholesale prices (2011/12=100)
General index 122.0 124.0 128.4 133.3 136.3 141.7 146.2 154.3
Fuel 91.5 94.0 105.2 109.8 117.4 131.9 139.2 n/a
Manufactured goods 119.4 121.8 126.4 131.0 133.2 136.3 139.5 n/a
Financial indicators
Exchange rate Rs:US$ (av) 74.4 73.8 72.9 73.8 74.1 74.9 75.2 77.2
Exchange rate Rs:US$ (end-period) 73.8 73.1 73.5 74.3 74.3 74.3 75.8 78.9
Deposit rate (av; %) 5.5 5.9 5.5 5.5 5.5 5.5 5.6 5.7
Lending rate (av; %) 9.1 9.0 8.8 8.7 8.7 8.6 8.5 8.6
3-month Short-term interest rate (av; %) 4.4 3.7 3.7 3.8 3.8 3.9 4.0 5.0
M1 (end-period; Rs bn)b 43,250 44,099 47,943 48,249 48,204 49,316 53,030 52,439
M1 (% change, year on year) 18.6 19.6 16.2 15.6 11.5 11.8 10.6 8.7
M2 (end-period; Rs bn)b 177,398180,554188,446191,696193,963198,173204,896206,619
M2 (% change, year on year) 12.2 12.4 12.2 10.7 9.3 9.8 8.7 7.8
BSE Sensex (end-period; 1978/79=100) 38,068 47,751 49,509 52,483 59,126 58,254 58,569 53,019
BSE Sensex (% change, year on year) -1.6 15.8 68.0 50.3 55.3 22.0 18.3 1.0
Sectoral trends
Production index (2011/12=100)
Manufacturing 121.2 133.2 136.5 119.1 131.6 135.0 138.1 134.2
Mining 86.4 107.5 126.1 107.1 101.1 114.0 130.9 116.7
Electricity 165.1 155.0 166.0 168.3 180.4 159.2 172.5 197.1
Foreign trade (US$ m)
Exports fob 74,109 75,757 90,428 95,539102,727106,794114,574116,666
- - - - - - -
Imports cif -88,258
110,821 131,678 126,966 147,466 167,417 170,017 186,987
Trade balance -14,149 -35,064 -41,249 -31,426 -44,739 -60,623 -55,442 -70,321
Foreign payments (US$ m)b
Merchandise trade balance fob-fob -14,816 -34,602 -41,744 -30,715 -44,511 -59,750 -54,483 n/a
Services balance 21,086 23,236 23,484 25,809 25,579 27,809 28,319 n/a
Primary income balance -9,405 -10,127 -8,743 -7,547 -9,792 -11,538 -8,392 n/a
Net transfer payments 18,410 19,280 18,869 19,034 19,012 21,322 21,152 n/a
Current-account balance 15,275 -2,212 -8,135 6,581 -9,712 -22,156 -13,404 n/a
Reserves excl gold (end-period) 508,258548,813543,104575,330597,974594,209564,758548,765
a At market prices. b Reserve Bank of India.
Sources: IMF, International Financial Statistics; Centre for Monitoring Indian Economy, Monthly Review of the Indian
Economy; Financial Times; Reserve Bank of India.

India 13
Monthly data
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Exchange rate Rs:US$ (av)
2020 71.3 71.5 74.4 76.2 75.7 75.7 75.0 74.7 73.5 73.5 74.2 73.6
2021 73.1 72.8 72.8 74.5 73.3 73.6 74.5 74.2 73.6 74.9 74.5 75.4
2022 74.4 75.0 76.2 76.2 77.3 78.1 79.6 n/a n/a n/a n/a n/a
Exchange rate Rs:US$ (end-period)
2020 71.5 72.2 75.4 75.1 75.6 75.5 74.8 73.6 73.8 74.0 73.8 73.1
2021 73.0 73.0 73.5 74.0 72.5 74.3 74.4 73.2 74.3 74.8 75.1 74.3
2022 75.0 75.5 75.8 76.4 77.7 78.9 79.4 n/a n/a n/a n/a n/a
Money supply M1 (% change, year on year)
2020 13.7 11.9 11.2 12.7 15.3 17.6 19.3 19.1 18.6 16.8 19.0 19.6
2021 20.1 19.0 16.2 16.6 15.1 15.6 13.9 12.2 11.5 12.7 12.3 11.8
2022 10.3 11.6 10.6 12.2 11.8 8.7 9.2 n/a n/a n/a n/a n/a
Money supply M3 (% change, year on year)
2020 11.2 10.2 8.9 10.8 11.7 12.3 13.2 12.6 12.2 11.6 12.5 12.4
2021 12.1 12.8 12.2 11.1 10.3 10.7 9.9 9.5 9.3 9.7 9.5 9.8
2022 8.4 8.7 8.7 9.5 8.8 7.8 8.6 n/a n/a n/a n/a n/a
Money market rate (end-period; %)
2020 5.75 5.76 5.86 5.42 5.14 4.76 4.66 4.46 4.08 3.84 3.75 3.65
2021 3.69 3.75 3.75 3.76 3.76 3.78 3.80 3.80 3.82 3.86 3.90 4.02
2022 4.14 4.22 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Lending rate (av; %)
2020 9.4 9.4 9.4 9.4 9.1 9.1 9.1 9.1 9.1 9.0 9.0 8.9
2021 8.8 8.8 8.8 8.8 8.7 8.7 8.7 8.7 8.6 8.6 8.6 8.6
2022 8.5 8.5 8.5 8.5 8.5 8.7 n/a n/a n/a n/a n/a n/a
Industrial production (% change, year on year)
2020 2.2 5.2 -18.7 -57.3 -33.4 -16.6 -10.5 -7.1 1.0 4.5 -1.6 2.2
2021 -0.6 -3.2 24.2 133.5 27.6 13.8 11.5 13.0 4.4 4.2 1.0 1.0
2022 2.0 1.2 2.2 6.7 19.6 12.3 n/a n/a n/a n/a n/a n/a
BSE Sensex stockmarket index (end-period; 1978/79=100)
2020 40,723 38,297 29,468 33,718 32,424 34,916 37,736 38,628 38,068 39,614 44,150 47,751
2021 46,286 49,100 49,509 48,782 51,937 52,483 52,587 57,552 59,126 59,307 57,065 58,254
2022 58,014 56,247 58,569 57,061 55,566 53,019 57,570 n/a n/a n/a n/a n/a
Consumer prices (% change, year on year; av; seasonally adjusted)
2020 7.6 6.6 5.9 7.3 6.2 6.2 6.8 6.8 7.3 7.5 6.9 4.5
2021 4.0 5.1 5.6 4.3 6.2 6.2 5.6 5.3 4.3 4.5 4.8 5.6
2022 6.0 6.0 7.0 7.9 7.0 7.0 6.7 n/a n/a n/a n/a n/a
Wholesale prices (% change, year on year; av; seasonally adjusted)
2020 3.4 2.2 0.3 -1.6 -3.4 -1.6 -0.1 0.6 1.3 1.2 2.3 1.9
2021 2.4 4.8 7.9 10.8 13.1 12.2 11.6 11.6 11.8 13.8 14.8 14.1
2022 13.6 13.4 14.6 15.5 16.6 15.2 13.9 n/a n/a n/a n/a n/a
Total exports fob (US$ m)
2020 25,853 27,743 21,491 10,160 19,194 21,972 23,729 22,810 27,569 24,920 23,620 27,216
2021 27,538 27,633 35,257 30,747 32,299 32,493 35,513 33,378 33,836 35,729 31,794 39,271
2022 35,210 37,140 42,224 39,784 38,937 37,944 35,244 n/a n/a n/a n/a n/a
Total imports cif (US$ m)
2020 41,150 37,904 31,471 17,083 22,854 21,320 28,478 29,474 30,307 34,074 33,812 42,935
2021 42,030 40,749 48,899 46,039 38,828 42,098 46,147 45,078 56,242 53,698 53,417 60,302
2022 52,253 57,025 60,739 60,187 63,223 63,577 66,264 n/a n/a n/a n/a n/a
Trade balance fob-cif (US$ m)
2020 -15,296 -10,162 -9,980 -6,924 -3,660 652 -4,748 -6,664 -2,738 -9,153 -10,192 -15,718
2021 -14,492 -13,115 -13,642 -15,292 -6,529 -9,605 -10,634 -11,700 -22,405 -17,969 -21,623 -21,031
2022 -17,043 -19,885 -18,515 -20,403 -24,286 -25,632 -31,021 n/a n/a n/a n/a n/a
Foreign-exchange reserves excl gold (US$ m)
2020 442,303 451,359 447,229 448,801 460,662 471,797 496,943 505,033 508,258 523,701 539,629 548,813
2021 553,829 549,133 543,104 552,556 560,600 575,330 582,491 602,964 597,974 602,125 599,220 594,209
2022 590,860 590,525 564,758 554,566 562,137 548,765 534,233 n/a n/a n/a n/a n/a
Sources: IMF, International Financial Statistics; Haver Analytics.

India 14
Annual trends charts

India 15
Quarterly trends charts

India 16
Monthly trends charts

India 17
Comparative economic indicators
Basic data
Land area
3,287,263 sq km (including Indian-administered Kashmir); of the total, 57% is agricultural land and
16% is forest area
Population
1.41bn (2021; UN)

India 18
Main towns
Population of metropolitan areas and regions in millions (2011 census)
New Delhi (capital): 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, 2641°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 official language and the primary tongue of 30% of the population. English is an
additional language used for official purposes and also used widely in business circles. Individual
states may legislate an official language, and several have done so
Religions
Hindu (79.8% in 2011 census); Muslim (14.2%); Christian (2.3%); Sikh (1.7%); Buddhist (0.7%);
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 2021: Rs73.9:US$1
Fiscal year
April 1st-March 31st
Time
5 hours 30 minutes ahead of GMT
Public holidays
January 26th (Republic Day); August 15th (Independence Day); October 2nd (Mahatma Gandhi’s
birthday); also major Hindu, Muslim, Christian and other religious holidays

India 19
Political structure
Official name
Republic of India
Form of state
India 20
Federal republic, with 28 states and eight union territories
Head of state
The president, Droupadi Murmu, was elected in July 2022 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 (MPs)
National legislature
Bicameral. The Lok Sabha (the lower house) has 545 members—543 elected from singlemember
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 MPs 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 National Democratic Alliance, a coalition led by the Bharatiya Janata Party (BJP), won the
largest number of seats at the parliamentary election held in April-May 2019 and formed a
government
National election
The most recent election for the Lok Sabha was held in April-May 2019; the next is scheduled to
take place by May 2024
Main political organisations

BJP; Indian National Congress; All India Anna Dravida Munnetra Kazhagam (AIADMK);
Trinamool Congress (TMC); Biju Janata Dal (BJD); Shiv Sena (SHS); Telugu Desam Party (TDP);
Telangana Rashtra Samithi (TRS); Communist Party of India (Marxist), or CPI (M); YSR Congress
Party (YSRCP); Nationalist Congress Party (NCP); Lok Janshakti Party (LJP); Samajwadi Party
(SP); Aam Aadmi Party (AAP); Rashtriya Janata Dal (RJD); Janata Dal (United); Bahujan Samaj
Party (BSP); Dravida Munnetra Kazhagam (DMK)
Key ministers
Prime minister: Narendra Modi (BJP)
Agriculture & farmers' welfare: Narendra Singh Tomar (BJP)
Commerce & industry: Piyush Goyal (BJP)
Communications & information technology: Ashwini Vaishnaw (BJP)
Defence: Rajnath Singh (BJP)
Education: Dharmendra Pradhan (BJP)
External affairs: Subrahmanyam Jaishankar (BJP)
Finance: Nirmala Sitharaman (BJP)
Health & family welfare: Mansukh L Mandaviya (BJP)
Home affairs: Amit Shah (BJP)
India 21
Power: Raj Kumar Singh (BJP)
Central bank governor

Shaktikanta Das

India 22
Recent analysis
Generated on September 18th 2022
The following articles were published on our website in the period between our previous forecast and this one,
and serve here as a review of the developments that shaped our outlook.
Risk
Analysis
Global operational risk review—economic risks are rising
August 18, 2022: Overview
With Russia's invasion of Ukraine continuing to fuel commodity prices and pushing global
inflation to record highs, we have downgraded the macroeconomic risk score of 82 countries
(out of 180).
Russia has limited its gas flows to Europe, and a cold winter would raise the risk of severe
negative spillover effects on the region's economic output and growth.
High inflation globally (we expect prices to rise by an average of 9.6% this year) increases
the risk of social unrest, especially in those developing countries where food forms a large
part of household purchases.
Major central banks' tightening is adding pressure on the global economy by raising
borrowing costs and supporting the US dollar (increasing repayment costs for those countries
that are indebted in US dollar).
Tensions between Western countries and China are continuing to grow, raising the risk of a
full global economic decoupling of the world's two largest economies.
The global repercussions of Russia's invasion of Ukraine have now shifted away from security
and political stability concerns towards macroeconomic risks. Higher commodity prices and
continued supply-chain disruptions are pushing up global inflation, which we expect will reach its
highest level since the 1990s this year. In the second quarter of 2022 we downgraded the overall
operational risk score for 71 out of 180 countries (compared with 60 countries in the previous
quarter) and the macroeconomic risk score for 82 countries (compared with 56 countries). High
energy commodity prices was one of the main reasons attributed to the downgrade for 50 of these
countries.
A cold winter could exacerbate Europe's energy crisis

India 23
(40% risk)
Russia has weaponised its energy supplies by limiting gas flows to Europe via the Nord Stream
pipeline to 20% of its capacity. If a cold winter leads to above-average gas demand, Europe could
experience a severe recession in 2022/23. Major parts of the industrial sector would be forced to
ration energy usage and reduce their workforces, the negative effects of which would spill over to
the economy as supply chains grind to a halt. High energy prices would lead to a surge in
bankruptcies as firms become unprofitable. Governments could also halt price protections for
households, increasing heating costs further and eroding consumers' purchasing power.
Equipment issues at liquefied natural gas (LNG) import terminals could also further tighten the
availability of alternative gas supplies, and problems in the French nuclear sector may also
increase demand. A breakdown of EU solidarity is another risk, with member states refusing to
agree to domestic shortages to help their neighbours and blocking onward gas flows. Central
Europe, Germany and Austria would be most exposed to this risk.
Anger about rising food prices may spill over on to the

streets (31-40% risk)
Persistent inflationary pressures, caused by supply-chain disruptions and Russia's invasion of
Ukraine, are pushing up global inflation, which is at its highest level since the 1990s. This could
fuel social unrest if inflation is far higher than wage increases, preventing poorer households from
purchasing basic staples. Such protest movements have been seen in India, South Korea, Sri
Lanka, Ecuador and Argentina, and could spread globally, posing risks to political and social
stability. They could be heightened in countries with weaker labour organisations, where workers
are unable to co-ordinate in negotiating salaries that account for inflation. Such movements could
paralyse entire countries, severely weighing on global growth.
Aggressive monetary tightening could lead to a global

recession
Major central banks are rapidly raising interest rates to try to tame rising inflation. These
measures, amid other destabilising factors (for example the war in Ukraine, supply-chain
disruptions and China's zero-covid policy), are fuelling a sharp increase in long-term interest rates,
putting pressure on the global economy. A prolonged rise in inflation could prompt an even more
aggressive response from central banks that would undermine household purchasing power amid
already high energy and commodities prices.
In developed countries, a sharp economic slowdown could result in a stockmarket crash, which
would weigh heavily on global growth and sink investor sentiment. In emerging markets, interest-
rate rises could prompt currency depreciations and raise the risk of sovereign debt defaults (as
happened in Sri Lanka in April). In Asia, we believe that Laos and Mongolia will be the countries

India 24
most at risk of a sovereign default in 2022-26. In Africa, we do not expect a systemic debt crisis,
but excessive debt and heavy debt-servicing costs will weigh on economic growth across many
countries in the region (including Sudan, Zimbabwe and Ethiopia).
A rapid decoupling of the global economy would force

countries to take sides
Western democracies, notably the US and the EU, are concerned about China's reluctance to
condemn Russia's invasion of Ukraine. In parallel, China is apprehensive of US-Taiwan relations
and efforts by the US to convince other democracies to pressure China using restrictions in trade,
technology and finance. The EU has also taken an increasingly confrontational stance towards
China's human rights abuses in Xinjiang, unequal treatment of EU and Chinese firms, and its
subsidy-led industrial model. In an extreme scenario, China could initiate military manoeuvres in
the South China Sea (most probably in Taiwan), exacerbating tensions and pushing the West to
unite in imposing sweeping trade and investment restrictions on China.
A gradual decoupling between the West and China is already part of our core forecast. However,
in an extreme scenario, a miscalculation in China's military operation in Taiwan or a decision to
annex the island could spiral into a wider conflict between the US and China. This would push the
US and the EU to unite in imposing sweeping trade and investment restrictions on China, similar
India 25
to the actions taken against Russia after it invaded Ukraine. In retaliation, China could block
exports of raw materials and goods that are crucial to the global economy, such as rare earth
minerals. The conflict would force some economies to choose sides and have a disastrous
economic impact, forcing companies to operate two supply chains while fearing operational
disruptions. Countries whose debt is closely tied to both the West and China would have to
navigate a more complicated global financial system and would stand to lose considerably.
Economy
Forecast updates
Indian central bank keeps further tightening on the radar
August 8, 2022: Monetary policy outlook
What's happened?
On August 5th the monetary policy committee of the Reserve Bank of India (RBI, the central bank)
agreed unanimously to raise the repo rate (the benchmark policy interest rate) by 50 basis points
to 5.4%. The standing deposit facility rate, which acts as the floor of the policy corridor, was
raised from 4.65% to 5.15%. With 140 basis points of rate increase already undertaken in 2022,
EIU now expects the policy rate to be raised by another 50 basis points over the remainder of the
year, instead of the 20 basis points we expected previously.
Why does it matter?

The RBI's statement expressly indicates the central bank's discomfort with the prevailing
consumer price inflation level, which has consistently exceeded its target band in 2022. The RBI
will focus on reining in price pressures, as it seems comfortable about the pick-up in economic
growth through the industrial and service sectors.
This strengthens our belief that the RBI will maintain its trajectory of raising rates until early
2023. This will result in higher borrowing rates for households and firms and slow credit growth
by the end of 2022. In turn, this will lead to a slowdown in GDP growth in fiscal year 2023/24
(April-March) from the 6.9% expected in 2022/23. The slower growth rate and easing inflation will
prompt the RBI to undertake monetary easing from 2024.
Higher government bond yields, due to rate increases and the surge in global yields, will prove
problematic for the government's agenda of large market borrowing to fund the fiscal deficit and
stick to the targeted fiscal deficit ratio of 6.4% of GDP, and will probably result in the paring back
of ambitious capital spending plans.

India 26
Global factors such as high commodity prices (notwithstanding the recent correction), risk
aversion and the possible onset of a recession in certain regions will also guide the RBI's policy
from late 2022. The central bank's latest statement focused on global risks affecting domestic
fundamentals. Geopolitical contagion has worsened the appetite for riskier emerging-market
assets, and this trend will persist in the remainder of 2022. The swifter than anticipated monetary
tightening in the US has also weakened the domestic currency, the rupee, which has depreciated
by nearly 5% so far in 2022, with a stronger depreciation arrested only by running down the RBI's
substantial foreign-exchange reserves. In turn, the weaker rupee has fuelled imported inflation.
What next?
We expect the RBI to raise the policy rate by another 50 basis points across October-December
2022. The rupee will depreciate by another 1.5-2% in nominal terms against the US dollar over the
remainder of the year, with the RBI using reserves to stem a faster and steeper depreciation.
Indian inflation to exceed RBI’s target in 2022
August 17, 2022: Inflation
What's happened?
Data released by the Ministry of Statistics and Programme Implementation showed that consumer
price inflation decelerated to a five-month low of 6.7% year on year in July, from 7% in June.
Meanwhile, according to data from the Ministry of Commerce and Industry, wholesale price
inflation softened to 13.9% in July, from 15.2% in June.
Why does it matter?

The current inflationary trend seems to have peaked at 7.8% in April. Since then, consumer price
growth has moderated for three consecutive months. However, the headline inflation continued to
exceed the 2-6% medium-term inflation target band set by the Reserve Bank of India (RBI, the
central bank). Consequently, EIU believes that the recent moderation in price growth is
insufficient for the RBI to halt its monetary tightening. We expect the RBI to raise the repo rate
(the policy rate) by 50 basis points across September-December 2022.

India 27
The easing in headline inflation was primarily driven by a softening in food price inflation, which
stood at 6.7% year on year in July, owing to moderation in inflation of vegetables and edible oils
prices. Good rainfall and restrictions on grain exports have contained food price inflation.
Meanwhile, the reduction of excise duties on fuel, introduced in May 2022, has helped to ease the
surge in transport costs. Core inflation, which excludes food and energy prices, remained sticky at
6% year on year, for the third consecutive month.
The growth in wholesale price inflation was broad-based across all the three major sub-segments
of the wholesale price index—primary articles, fuel and power, and manufactured products—
driven by higher prices for mineral oils, crude petroleum, natural gas, chemicals and manufactured
food products. An anticipated stabilisation in global commodity prices amid fears of a growth
slowdown in major economies will support the easing of wholesale price inflation in the months
ahead. However, producers will continue to pass on higher input costs to consumers with an aim
to protect revenue.
What next?
We expect retail inflation to continue to moderate in the months ahead, as global commodity
prices stabilise, but that it will remain elevated above the central bank's target. A benign

India 28
monsoon season will cool food prices, while fuel prices have already moderated owing to the
reduction in levies. However, risks remain in the form of imported inflation because of depreciation
of the local currency, or a bad harvest as a result of adverse weather conditions. We now forecast
consumer prices to grow by an average of 7% in 2022, revised down from our previous
expectation of 7.3%, and for producer price inflation to average 13.8% this year.
Extension of free food grain scheme likely in India

August 30, 2022: Policy trends
What's happened?
The Indian government's free food grain scheme for the poor, which was launched at the start of
the pandemic in March 2020, is scheduled to end on September 30th. EIU believes that the
government is likely to extend the scheme for another three to six months on inflation concerns
and political compulsions.
Why does it matter?

The extension of the scheme has economic, political, fiscal and food security ramifications. The
scheme has helped to partially shield the poor from higher food inflation, which has averaged 7%
year on year over January-July 2022, compared with 3.7% in the same period in 2021.
Notwithstanding the ebb in food inflation from 8.1% in April to 6.7% in July, and further
moderation that we expect, inflation levels remain uncomfortably high, which could lead to an
extension of the scheme. This will support rural consumption over 2022/23 (April-March), as
income streams in the rural belts have not yet recovered from pandemic lows, and food forms the
largest proportion in the consumption basket of the poor.
Entwined with this is the ruling Bharatiya Janata Party's electoral compulsions, with a number of
states including Gujarat, Himachal Pradesh and states in North-east India scheduled to hold
assembly elections over late 2022 and early 2023.
Under the scheme, about 800m beneficiaries, both rural and urban, are eligible to receive 5kg of
food grains (rice/wheat) per month for free. However, food security could prove to be an
increasing challenge for the government if the scheme is extended until March 2023. According to
an internal assessment by the Ministry of Consumer Affairs, Food and Public Distribution, the
stock of rice in the central pool could then fall below buffer stock (operational stocks and strategic
reserves) norms, although not to worrisome levels. However, this is measure is exclusive of the
kharif harvest, which will add to reserves by October 2022. However, paddy sowing has been
India 29
sub-par until date over the ongoing season. Wheat stocks will remain sufficiently above buffer
norms to enable continuation of the scheme until March.
The extension of the scheme will raise total fiscal expenditure to 16% of GDP over 2022/23 from the
budgeted 15%, resulting in slippage of the fiscal deficit beyond the budgeted 6.4% of GDP. We
believe that the government will pare back some capital expenditure allocated for infrastructure
spending to ensure no slippage, even under our assumption that tax collection will exceed the
official projections, thereby providing some buffer.
What next?
We expect electoral considerations and an inflationary economic environment to contribute to the
continuation of the scheme for another three to six months, concluding after rural incomes rise
following the October harvest season and food inflation decelerates, reaching 5-6% by December.
Analysis
Battery supply chain offers risks and opportunities in Asia
August 8, 2022: Policy trends
China enjoys a big lead in the battery industry, as it expands its manufacturing capacity while
extending influence in the upstream mining sector to secure access to critical resources.
As the race to establish alternative battery supply chains intensifies, multilateral forums
such as the Indo-Pacific Economic Framework (IPEF) will provide opportunities for
participants to combine natural resources, financing and production.
The war in Ukraine and Russia's willingness to use its natural gas and oil exports as leverage
against other countries have reminded the world of vulnerabilities tied to reliance on fossil fuels,
adding urgency to the race for clean energy sources and application technologies. Against this
background, batteries used in electric vehicles (EVs) have shown substantial growth potential.
Asian countries, with ample resources and complex manufacturing supply chains in the region,
will play a big role in this quest.
China unmatched in the competition for batteries

resources
Many Asian countries are well endowed with raw materials critical to the manufacture of batteries,
including lithium, nickel, copper, graphite and cobalt. Indonesia, for instance, has 21% of the
world's detected nickel reserves. Although the Democratic Republic of Congo (DRC) and Russia
India 30
remain the world's largest producers of cobalt, reserves are also found in Australia, the Philippines
and Papua New Guinea; investment and production in these Asian countries have been catching
up in recent years. Meanwhile, Australia produced more than half of the world's total lithium
output in 2021, and its 2.7m tonnes of explorable lithium reserves trail only those of Chile.
Well-established maritime and overland trade routes in the region, business-friendly labour and
environmental policies and relatively encouraging government policies towards foreign
investment in the mining sector in many countries make it comparatively easy for multinationals to
establish and expand EV-battery supply chains in the region.
China has a particularly strong presence throughout the EV battery supply chain, from mineral
extraction to end-product manufacturing. The country has the world's fourth-largest explorable
lithium reserves, and it ranks fifth in terms of nickel reserves. In addition, it possesses almost a
quarter of global graphite reserves and dominates production of the commodity, which is used in
the anode of lithium batteries. More importantly, the country boasts a strong capacity for
processing the raw ores of these minerals; for example, the processing of graphite and
production of anodes takes place almost exclusively in China, although extraction has started to
accelerate in Africa.

India 31
China's influence over the supply chains for EVs and batteries extends beyond its own borders.
Chinese mining companies have significant holdings of mineral resources across the globe,
including cobalt mines in the DRC and lithium mines in Chile. Partially owing to concerns over
insufficient production of metals critical for battery manufacture as the global adoption of EVs
accelerates, Chinese battery makers have been expanding upstream to secure the supply of raw
materials. Ganfeng Lithium, a Chinese battery maker, concluded a deal in July for the rights to two
salt lake brine mines in Argentina, which can be used for lithium extraction.
More importantly, this effort to control raw materials from the source has been accompanied by
moves to extend influence along the industrial chains. For example, Chinese investors are already
heavily involved in Indonesia's nickel mines. Involvement in the upstream extraction process has
increasingly been complemented by Chinese-backed investment in Indonesia 's nickel-processing
capacities. This concerted expansion has been designed to reduce frictions and costs along the
nickel supply chain from Indonesia to China by integrating extraction, processing and
transportation.
Securing access to mineral resources while maintaining its lead in battery and components
manufacturing (China currently accounts for around 80% of global lithium-ion battery
manufacturing capacity) bodes well for China's prospect of extending its dominance of the EV
battery supply chain. This dominance represents a risk that vulnerabilities in the fossil-fuel supply
chain will be replicated in clean energy and energy storage supply chains, because of an even
greater reliance on a single supplier.
Efforts to establish new supply chains will accelerate

Partly to counter China's enormous leverage in this area, other countries in the region have also
stepped up efforts to secure raw materials and to build alternative supply chains, in order to avoid
being subject to a monopoly in the EV batteries industry. Sumimoto, a Japanese conglomerate,
maintains operations at nickel and cobalt mines in the Philippines and New Caledonia. Australia,
which holds significant lithium resources, has been cautious in allowing Chinese investment in its
lithium mines and is building up extraction and production capacity for battery-grade lithium.
Supply-chain resilience initiatives such as the US-led Indo-Pacific Economic Framework (IPEF)
and mega-regional trade agreements such as the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) have the potential to provide a framework to promote co-
operation in EV battery production distinct from the Chinese-dominated supply chain in the
region.
The IPEF includes Japan, Australia, South Korea (a main manufacturer and exporter of EV
India 32
batteries, along with China and Japan) and a slew of South-east and South Asian economies. The
establishment of the IPEF provides opportunities for member countries to combine manufacturing
expertise, financing capacity and provision of raw materials to establish a supply-chain network
linking together resources exporters, component manufacturers and end markets, with a set of
agreed regulatory standards and trade rules to reduce trade friction and facilitate supplies. It is
possible for the countries involved to negotiate favourable tariffs and access to investment
through bilateral agreements or multilateral trade blocs, to encourage the relocation of
manufacturing.
Moreover, as countries become more aware of the strategic importance of clean energy and
energy storage industries, the screening of foreign investment will tighten and opportunities will
be increasingly reserved for investors from countries on friendly terms. That said, it is unrealistic
for any country to cut itself off completely from the China-centred EV battery supply chain.
Nevertheless, efforts to diversify supply and reduce risk exposure are going to accelerate in the
coming years.
Global chart: China’s role in global trade
August 11, 2022

India 33
The EU, China and the US are the top trading partners for 75% of countries. Over the past
20 years the EU has remained the world's largest exporter and importer of merchandise by value.
However, the global trade landscape is changing. Since China joined the WTO 20 years ago the
country has rapidly become the second-largest exporter and importer in the world, overtaking
the US and becoming a critical part of global supply chains.
The EU has maintained robust global trade clout in recent years and a strong political openness
to trade liberalisation. Without accounting for inter-EU trade, Europe (comprising the EU, the
UK, Switzerland, Norway and Turkey) is both the top destination of exports for 59 countries
and the top source of imports for 68 countries (the highest number in the world in both cases).
However, the EU's diplomatic relations with China are souring and economic sanctions
following Russia's invasion of Ukraine have disrupted the region's trade. We expect that in the
coming years the EU will seek to become more self-sufficient in the production of strategic
goods, such as semiconductors and intermediate parts.
Over the past two decades China has become the biggest destination of exports for
35 countries (from six in 2000) and the top source of imports for 44 countries (from zero in 2000).
However, China's economic success and integration into international trade and supply chains
is encountering political friction with increasingly apprehensive Western partners. Despite
these tensions, we believe that China's trade clout will continue to rise and that 17.5% of the
world's goods exports will originate from China by 2026 (up from 14.5% this year).
India 34
China's rise took place as Japan, the world's third-largest economy, lost ground on the global
trade scene. In 2000 Japan was the top destination of exports for nine countries and the top
source of imports for eight countries. Today it is no longer the largest destination of exports or
source of imports for any country, with China overtaking it in every goods category.
Unlike China and the EU, the US retains a lot of trading power, as the country is the largest
world importer; in 2021 the US made up 13% of global merchandise imports. The country is the
top source of imports for 28 countries and the biggest destination of exports for 30 countries.
However, the US has been pursuing an aggressive approach to reshoring production by
passing legislation to boost semiconductor production and maintaining tariffs on certain
Chinese imports. We expect the US to maintain tariffs on China in the coming years and to
maintain its increasingly protectionist stance towards trade agreements.
Elsewhere in the world, the EU is the top source of imports for 38 developing economies.
However, since 2000 China has risen rapidly to become the second-largest trading partner for
developing economies and is just behind the EU as the top source of imports for 37 of these
countries. We also expect that intra-regional trade will play an increasingly important role in
the coming years. For instance, South Africa is the largest exporting country for eight other
African countries, and the UAE has become the top destination of exports for nine countries in
the Middle East and Africa.
EIU Global Outlook—a summary of our latest global views
August 16, 2022
The war in Ukraine is affecting the global economy via Russia's weaponisation of energy
supplies, higher commodity prices, supply-chain disruptions and worsening sentiment. These
transmission channels are jointly causing inflation to spike and growth to slow sharply,
especially in Europe. This situation will continue over the rest of the year, as we expect the
shooting war to last until the end of 2022 at least, before the conflict becomes a protracted,
probably never-ending one. On the basis of this forecast, we assume that the sanctions that the
US and the EU have imposed on Russia will remain in place throughout our forecast period
(2022-26), and probably beyond. Given Russia's role as a leading supplier of commodities
(including oil, gas, base metals, grains and gold), this will prompt a long-term reshuffling of
global supply chains.
Russia has weaponised energy supplies to Europe

In terms of higher commodity prices, oil prices will remain at about US$90-110/barrel for as long as
the conflict rages on. The EU ban on seaborne Russian oil imports and uncertainty surrounding
supplies will exacerbate existing market tightness. European gas prices will more than double this
year, after a fivefold increase last year. Russia's weaponisation of gas deliveries to Europe (and in
particular Germany) will exacerbate these issues. We assume that Russian gas flows to Europe via
Nord Stream will fluctuate between zero and 20% capacity in the coming months, as Russia aims
to make gas supply as unpredictable as possible. Gas rationing in the winter of 2022/23, combined
with a further spike in electricity prices, will prompt an economic downturn across the region; we
now expect zero-growth in the euro zone in 2023 and full-year recessions in Germany, the UK and
Italy.
The war in Ukraine is exacerbating strains on supply

chains
Owing to sanctions, companies are struggling to find financial channels through which to
conduct trade with Russia. Meanwhile, the blockade or destruction of some transport
infrastructure (notably ports in Ukraine) will compound supply-chain disruptions. (We remain
sceptical that a recent UN-sponsored deal to allow Ukraine to export grains will prove long-
lasting.) These disruptions will add to supply-chain issues that arose during the covid-19 crisis,
which we believe will only start to normalise beyond mid-2023.
China's zero-covid policy is another drag on global

growth
China's zero-covid policy is another major drag on global growth, and we expect it to continue well
India 35
into 2023. In addition, we now believe that China's fiscal stimulus measures will have a smaller
scope than previously expected. This will further weigh on China's growth, which we forecast to
be no higher than 4% this year. China's increasingly ideological and unpredictable stance on
covid19—coupled with our expectation that sudden shutdowns of other Chinese cities,
production and logistics networks will remain a recurring theme throughout 2022—will continue to
weigh on global sentiment.
Major central banks are becoming even more

aggressive with tightening
Higher commodity prices and supply-chain issues are fuelling global inflation, which will spike to
nearly 10% in 2022—a 26year high. Despite concerns about the impact of the RussiaUkraine war
on their economies, the major central banks are doubling down on their efforts to control inflation.
We forecast that the Federal Reserve (Fed, the US central bank) will raise rates aggressively this
year and commence balance-sheet run-off. The European Central Bank will discontinue its
quantitative easing programme this year and raise rates three times this year and five times next
year.
The war in Ukraine will weigh on global growth, but we

do not expect recession
Beyond the war in Ukraine, supply-chain issues and China's zero-covid policy, we assume that
one more variant of covid-19 will emerge in 2022, denting growth later this year, and have lowered
our forecast to 2.8% (from a prewar forecast of 3.9%)—or a US$1trn loss in global GDP. The
economic impact of the war will be felt most in Ukraine and Russia, but the rest of Europe is also
taking a huge hit via an energy and trade shock.
Food insecurity has become a serious risk in

developing countries
Elsewhere in the world, the war-induced drag on growth will derive from higher inflation and
worsening sentiment. For emerging countries that rely heavily on Russian and Ukrainian grains
supplies (like Lebanon, Yemen or Egypt), food insecurity is another major risk. The fighting and
the blockade of Ukrainian ports by Russia have halted exports of grains, and as both countries
account for about a third of global wheat trade, prices of wheat, are soaring, and this will fuel the
risk of famine. Extreme weather events, such as high temperatures and droughts in Europe, are
exacerbating this risk. This situation raises the likelihood of social unrest in developing countries,
which are also facing record-high inflation and must start to repay the huge debt pile-ups that
they have contracted during the pandemic.
World economy: forecast summary

India 36
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Real GDP growth (%)
World (PPPa exchange rates) 3.7 3.6 2.7 -2.9 6.0 3.2 2.8 3.2 3.3 3.2
World (market exchange rates) 3.2 3.0 2.3 -3.6 5.7 2.8 2.1 2.6 2.8 2.7
US 2.3 2.9 2.3 -3.4 5.7 1.7 1.2 1.7 2.0 2.1
Euro area 2.7 1.8 1.6 -6.4 5.2 2.8 0.0 1.6 1.7 1.7
Europe 3.0 2.2 1.8 -5.4 5.8 1.9 0.5 1.9 2.0 2.0
China 6.9 6.8 5.9 2.2 8.1 4.0 5.3 4.9 4.6 4.1
Asia & Australasia 4.8 4.5 3.5 -1.4 5.8 3.8 3.8 3.8 3.8 3.6
Latin America 0.9 0.8 -0.7 -7.0 6.5 3.1 1.3 2.0 2.3 2.3
Middle East & North Africa 1.3 1.6 1.5 -3.6 4.1 5.0 3.7 3.0 2.9 3.0
Sub-Saharan Africa 2.3 2.6 2.3 -2.8 4.5 3.2 3.8 4.2 4.2 4.0
World inflation (%; av)b 3.2 3.5 3.5 3.4 5.3 9.6 6.3 3.9 3.4 3.1
World trade growth (%) 5.6 3.8 0.2 -4.9 10.9 3.9 3.3 3.7 3.6 3.6
Commodities
Oil (US$/barrel; Brent) 54.4 71.1 64.0 42.3 70.4 102.0 91.7 85.9 78.3 69.1
Industrial raw materials (US$; %
20.2 2.2 -8.6 -3.2 40.4 7.0 -9.4 -1.4 14.8 -3.1
change)
Food, feedstuffs & beverages (US$; %
-1.0 1.6 -4.3 7.8 36.3 22.4 -12.3 -9.3 0.0 -4.1
change)
Exchange rates (av)
¥:US$ 112.1 110.4 109.0 106.8 109.8 130.4 131.6 123.9 119.1 117.8
US$:€ 1.13 1.18 1.12 1.14 1.18 1.06 1.11 1.18 1.21 1.23
a Purchasing power parity. b Excludes Venezuela.
Source: EIU.

Country Report India September 2022

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Generated on September 18th 2022

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Symbols for tables

Outlook for 2022-26

Data and charts

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Political and economic outlook

exchange rate in fiscal year beginning April 1st. e EIU estimates.

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Key changes since July 22nd

The month ahead

Major risks to our forecast

Outlook for 2022-26

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Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Data and charts

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Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Annual trends charts

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Quarterly trends charts

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Monthly trends charts

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Comparative economic indicators

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Weather in New Delhi (altitude 218 metres)

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Main political organisations

Power: Raj Kumar Singh (BJP)

Central bank governor

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A cold winter could exacerbate Europe's energy crisis

Anger about rising food prices may spill over on to the

Aggressive monetary tightening could lead to a global

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

A rapid decoupling of the global economy would force

Why does it matter?

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Why does it matter?

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Extension of free food grain scheme likely in India

Why does it matter?

China unmatched in the competition for batteries

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Efforts to establish new supply chains will accelerate

Country Report September 2022 www.eiu.com © Economist Intelligence Unit Limited 2022

Russia has weaponised energy supplies to Europe

The war in Ukraine is exacerbating strains on supply

China's zero-covid policy is another drag on global

Major central banks are becoming even more

The war in Ukraine will weigh on global growth, but we

Food insecurity has become a serious risk in

World economy: forecast summary