India 

India country policy

Policy established 03 May 2011

• No Restrictions
• The country ceiling is 2000 mln euro
• Early warning signal 1500 mln euro
• - of which was used as at 2011-12-31 408 mln euro

Country class: 3

Restrictions

• Extended DAL (Date of Ascertainment of Loss): 6 months

India country facts

Atradius Dutch State Business Economic Research

Country Report last updated 19 January 2012   
Country :  INDIA 

Political Situation 

Fragile Coalition Government

Head of state
President Ms. Pratibha Patil (since July 2007), PM Manmohan Singh (Congress, since May 2004).

Form of government
5-party coalition government of the United Progressive Alliance (UPA), led by the centre-left Indian National Congress (INC).

International relations
Tensions in Kashmir weigh on the relation with Pakistan. 
Increasing ties with US, border disputes with China. 
Member of
UN, IMF, IBRD, Commonwealth, ADB, WTO, SAFTA, SAARC.

Internal Economic Situation
Decelerating Growth & High Inflation

General situation
Most important emerging market after China with expected LT growth of 9% per annum. India’s economy is (unlike most other Asian countries) driven by domestic consumption & investment, not export.  In spite of the bright LT outlook the current economic situation is relatively poor. Growth has decelerated since 2011 due to stubbornly high inflation, high interest rates, low consumer confidence, a depressed global financial-economic environment and a stall in structural reforms. 
The budgetary discipline of the government is poor as appears from the persistent budget deficits. A low tax base and high expenditure on subsidies (fuel, food & fertilizer) are the main culprits. These deficits however are largely financed domestically. The government is aware of India’s main structural shortcomings: poor infrastructure, a rigid labour markets, rigid land laws and poor education (for the majority of the population), but structural reforms are very difficult to implement due to the political system, vested interests and large income inequality. Although income inequality is large (poor North vs. rich South, country side vs. cities, caste system), the middle class is increasing rapidly. This creates increasing demand for consumer goods and opportunities for domestic and foreign investment.
The financial sector consists largely of SOB’s. 
 
External Economic Situation
Increasing  Current Account Deficit

Main sources of foreign exchange
Engineering products (23% XG), petroleum products (15%) textiles (15%), textile (14%), gems (14%), ICT, BPO

Main foreign markets
EU (21%, UK 4%, NL 4%), USA (11%), China (9%), UAE (12%), Singapore (4%)

Main expenses of foreign exchange
Import of petroleum products (32%), electronics (10%), capital goods (11%), gold & silver (9%), machinery 8%).

Balance of payments 
India remains a relatively closed economy (XGS is only 21% GDP). Structural trade balance deficits are largely balanced by surpluses on service and transfer account. Foreign capital inflows largely consist of portfolio investment.