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India - Setting the Context

India at a Glance

  • India is the second fastest growing major economy globally.  The IMF estimates growth of 8.2% in 2011 and 7.8% in 2012, placing it just behind China
  • The Indian economy is supported by highly favourable demographic fundamentals, with an estimated 70% of its citizens under 36 years old and an emerging class of university educated graduates (3.5 million new graduates per annum)
  • This large and active working population, combined with widening opportunities in education and business, underpins a fast growing domestic economy, fuelled by domestic demand
  • Exports are an increasingly important contributor to growth, comprising 22% of GDP in 2008 compared to just 13% in 2000.  This figure lags emerging market peers (c.52% for Asia ex-Japan), but leaves India less exposed to fluctuations in international trade 
  • The changing regulatory regime is fostering an attractive environment for investment.  The Services Sector accounts for c.22% of investment, computer software and hardware for 8%, telecommunications for 8% and housing and real estate for 7%

Political Background

  • India gained independence in 1947, and is the world’s most populous democracy, with 714 million people eligible to vote

  • The Prime Minister is the head of government, and presides over a Council of Ministers composed of elected members of parliament

  • The President is the head of state, and has limited executive power, but can influence the formation of governments when no party has gained an outright majority

  • The judiciary is constitutionally independent

  • The Congress Party and the Bharatiya Janata Party (BJP) the are the two main forces in Indian politics but neither commands an absolute parliamentary majority

  • Government is therefore through coalitions with smaller independent or regional parties often acting as coalition partners; two main alliances have emerged:
    • United Progressive Alliance (“UPA”), led by the Congress Party
    • National Democratic Alliance, led by the BJP
  • The UPA was re-elected to government in May 2009, and currently holds 262 seats in parliament, just 10 short of a majority 
  • The  government is headed by Dr. Manmohan Singh, a former finance minister and Governor of the Reserve Bank of India