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Country Profile Series
India
In-depth PESTLE insights
PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

REFERENCE CODE: ML00002-040
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PUBLICATION DATE: December 2016
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OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure in India.
Each of the PESTLE factors is explored in terms of four parameters: current strengths, current challenges, future
prospects, and future risks.
Summary
Key findings
India is the largest democratic country in the world, however, poor execution of demonetization and
corruption allegations remain a challenge
India is the largest democratic nation in the world and principles of democracy are deeply entrenched in the Indian
political system. Indian diversity is reflected in the federal political structure of government, where power is shared
between states and the center. There are national level elections, state level elections, municipal elections and
panchayat (village) level elections, all of which require citizens to exercise their vote. As per the World Bank’s Worldwide
Governance Indicators, India ranked in the 60.59 percentile in voice and accountability in 2015. Voice and accountability
measures the extent to which a country's citizens are able to participate in selecting their government, as well as
freedom of expression, freedom of association and freedom of the media. India ranks high due to its deep-rooted
democratic principles and respect for freedom of expression and the media. In comparison, China and Russia scored
percentile ranks of 4.93 and 19.21, respectively, in the same year.
On 8th November 2016, the central bank and the government banned old INR 500 ($7.3) and INR 1,000 ($14.6)
currency notes and issued new currency notes of INR 500 ($7.3) and INR 2,000 ($29.4). The maximum limit to withdraw
money per person per day was less than INR 4,500 ($66.68) from bank or INR 2,500 ($37) from cash machines.
According to Prime Minister Narendra Modi, the objective of the sudden announcement without any prior notice is to get
control over black money holders. India have more than 86% of cash circulation in the economy in INR500 and INR1,000
denominated notes, according to various estimates. A sudden swap of old currency generated kiosk and panic in the
country. Apart from some initial exemptions, the prime minister gave 50 days (until 30th December 2016) to exchange
old currency notes with the new one. However, it seems that the government failed to execute the plan since people are
not able exchange their money due to long queues in the banks and ATMs because of the limited inventory of cash with
the banks. Most of the ATM machines do not have cash or they need to be upgraded with new currency notes boxes.
Furthermore, majority of the population is not literate enough to withdraw cash from the ATMs or do not have easy
access to banks, especially in rural areas.
India have well developed equity market, but performance of the agriculture sector remain poor
Indian equity market has shown tremendous improvement over the years, thanks to the regulation by SEBI (Securities
and Exchange Board of India). SEBI is the regulator of securities market in India. Indian equity markets have become
world class, all thanks to the push towards liberalization and solid regulation. Indian equity markets have been termed as
one of the best in Asia, and the recent government’s push to open up the economy has made the markets look all the
more attractive. Stock market capitalization as a percentage of GDP has risen over the recent years. According to the
World Bank, the market capitalization as percentage of GDP stood at 73.1% in India, as compared to China (75.4%),

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Russia (29.7%) and Brazil (27.6%) in 2015.
According to the World Bank, the agriculture sector employs around 50% of the total employed population in 2013.
However, over the years, there was no significant improvement in this sector. The agriculture output, which was 26.32%
of GDP in 1990, declined to 21.15% of GDP in 2000 and further declined to 15.24% of GDP in 2016, according to
MarketLine. The average annual growth rate of agriculture output was more than 13.3% between 2003 and 2013.
However, it declined to 4.8% in 2014 and 4.9% in 2015, according to MarketLine. In fact, according to the World Bank,
the value added i.e. the output after all intermediate input deductions, is also showing declining trend. The agriculture
value added, which consisted of at least 29.02% of GDP in 1990, declined to 17.04% of GDP in 2015. The average
annual growth rate of the agriculture value added was just 1.67% in the past four years (2012–15). The poor agricultural
performance also reflected in extremely low standard of living of Indian farmers. According to the Indian express, farmer
suicides in the country increased by at least 40% from 2014 to 2015. According to some government sources, there were
at least 8,000 suicides reported in 2015, as compared to 5,650 suicides in 2014.
Indian tourism sector is growing, however, the country’s performance on literacy remains dismal
According to the ministry of tourism of India, there were at least 8.3 million foreign tourist arrivals in India in 2015, an
increase of 4.5% from the previous year. The foreign exchange earnings from tourism was estimated to be around
$21.07 billion in 2015, an increase of 4.1% from the previous year. On the other hand, the number of international
departures from India was 20.38 million in 2015. The number of domestic tourist was even higher and increased by
11.1% from 2014 to reach 1,432 million in 2015. According to the World Bank, international tourism receipts (expenditure
by the inbound visitors) as percentage of total exports was estimated to be at least 4.3% in India, which is higher in
comparison to Brazil (2.8%), China (2.3%) and Russia (3.5%). According to the ministry of tourism of India, the country
ranked 14th in the world in terms of tourism receipt. On the other hand, the international tourism expenditure of India
stood at 3.2% in 2014, which is lowest in comparison to the other BRICS nation, according to the World Bank.
Although India is approaching near universal enrolment in elementary education and spending on secondary education
has been increased considerably, literacy levels are lower compared to that in other emerging markets. People with
higher education and vocational training are also very ill-equipped and require on the job training. “Secondary Education
for All Action Plan”, launched in 2009, strives to provide universal access to secondary education by 2017. However, the
quality of education continues to be poor. OECD Program for International Student Assessment (PISA) held in 2009 saw
15 year-old students from two Indian states participating, whose performance was found to be far below that of the
OECD average. According to 66th Round of NSS for 2009–10, only 10% of the labor force was vocationally trained, and
only a quarter of then received formal vocational training, according to the Planning Commission, 2013. According to the
World Bank, the adult literacy rate (15 or above age) was one of the lowest amongst the BRICS nations. There were only
72.2% adult literate people in India in 2015, as compared to Brazil (92.6%), Russia (99.7%), China (96.4%) and South
Africa (94.6%). In addition, according the gender parity index of youth literacy, i.e. ratio of youth literate females to youth
literate males, India scored only 0.95 as compared to other BRICS nations. This shows that the nation have the higher
gender disparity in terms of education and the government should focus more on female education.
Despite the push to urban infrastructure, expenditure on research and development is inadequate
The Narendra Modi government has an ambitious plan of building 100 smart cities, which will be urban centers with
digital clusters connected via fiber optics, and will provide next generation service to residents. A budget of around $1.2
billion had been set aside to provide the initial push in order to revitalize the tech startups, along with an intention to
promote China style infrastructure in the country. This push by the government has already attracted attention of
technology giants like Cisco and IBM, who are showing keen interest in forming tie-ups with real estate developers in

order to submit proposals and bid for the projects. The DIPP (Department of Industrial Policy & Promotion) has already
expressed interest in the process of shortlisting technology consultants for the above project.
Yet, India’s gross expenditure on R&D as a percentage of GDP was around 0.8% in 2011, according to the World Bank.
This was lower than those of the other BRIC economies China (2% in 2014), Russia (1.2% in 2014), and Brazil (1.2% in
2013). Consequently, technological progress in India has been slow, which makes the country dependent on imports.
India has committed itself to increasing the figure to 2% by 2020 through its Decade of Innovations 2010–20 policy plan.
However, it remains to be seen whether this policy will result in tangible investments.
Comprehensive legal framework, but barriers to trade and development remain stiff
Legal and regulatory aspects are crucial to creating a successful business environment in any country. They reflect the
policy framework and the mindset of the governmental structure of that country, and ensure that every company is
functioning according to the statutory framework. The regulatory regime in India has comprehensive laws that have been
amended from time to time. Some of the important laws regulating business in the country are the Companies Act, the
Patents Act, the Copyrights Act, the Trademarks Act, the Special Economic Zones Act, the Labor Laws, the Right to
Information Act, the Information Technology Act, the Environment Protection Act and the Foreign Exchange
Management Act. Some of the regulatory bodies in India are the SEBI, the RBI, the Registrar of Companies, the Director
General of Foreign Trade, the Insurance Regulatory and Development Authority and the Telecom Regulatory Authority of
India. While the country has a sound legal framework for business entities—which has driven business growth—laws
and regulations are still not implemented properly. By and large, the legal system provides a fair, equitable, and
transparent framework for both employers and employees.
Despite significantly liberalizing trade over the last two decades, the tariffs imposed on some classes of imports are very
high. In addition to standard tariff rates, importers are also required to pay a countervailing duty, a form of VAT on
imported products. Moreover, the import tariff imposed by India is much higher than some other emerging markets. In
addition to high duties, the high bound tariff rate, which is the maximum tariff rate agreed by the country under
negotiations with the World Trade Organization (WTO), adds to the uncertainty regarding the future duties for producers
and investors. In some cases, in order to ensure domestic supply, there also exist taxes or restrictions on exports, which
creates price distortions in international markets. According to the World Bank, the total taxes on international trade as
percentage of revenue was the highest for India as compared to other BRICS nations. To reap increased benefits from
global trade, India needs to continue its customs duty reforms and work on the creation of a more consistent
environment for its trade. In 2014, the Modi government scuttled the World Trade Organization trade facilitation deal in
mid-2014, which would have smoothened trade across ports and borders, creating a negative sentiment contrary to the
growth friendly policies of the government. Like trade, foreign direct investment (FDI) in India is also relatively restrictive
in many sectors. In order to achieve its potential as an attractive FDI destination, India needs to speed up reforms in
opening up the designated sectors to foreign investment. Though India is more open to FDI than China, the barriers to
FDI in India are much higher than those of the other OECD countries.
Rich biodiversity but depleting water resources is a cause of concern
India is the seventh largest country in the world, and Asia's second largest nation, with an area of 3,287,263 sq. km.
Despite having only 2.5% of the world's land area, India accounts for 7–8% of globally recorded species. The country is
among the 12 mega biodiversity regions of the world, which are believed to be home to 60–70% of global biodiversity.
India has nearly 2,400 known species of amphibians, birds, mammals, and reptiles, of which 18.4% are widespread. Of
these, 10.8% are threatened. The country is home to nearly 19,000 species of vascular plants, of which 26.8% are
endemic. There are a multitude of benefits of biodiversity including medicines, industrial materials, and the provision of

ecological services. The Biological Diversity Act, 2002 aims to govern conservation and access to the sustainable use of
biological resources, and provides power to the National Biodiversity Authority. The Council of Scientific and Industrial
Research in India has earmarked a Traditional Knowledge Digital Library (TKDL), which is a computerized library of
Indian systems of medicine. By September 2013, an estimated 290,998 formulations of Ayurveda, Unani, Siddhi, and
Yoga had been documented in the TKDL. The US Patent and Trademark Office and the European Patent Office grants
nearly 2,000 patents related to Indian medicine systems annually.
India has a river system comprising more than 20 major rivers and several tributaries. Apart from these rivers,
groundwater provides another important source of water. Over the years, the water table in India has declined due to
excessive withdrawal for irrigation, industry and domestic consumption. According to the World Bank, the annual fresh
water withdrawal as percentage of internal resources was one of the highest as compared to other BRICS nations. Of
the total fresh water withdrawal, India used as high as 90.41% of water for agriculture, followed by domestic purpose
(7.3%) and industry (2.2%) in 2014. In 2014, the total fresh water withdrawal was estimated to be at least 761 billion
cubic meters, which is much higher than China which withdraw 607.8 billion cubic meters in the same year. In addition,
with severely degraded catchment areas, the extent to which groundwater can be recharged is diminished. The natural
drainage and water flow of many important rivers have been altered due to the withdrawal of water and the construction
of large dams. Rivers in India face dangerous levels of water pollution caused by waste and effluents discharged by both
households and industries, making it further unfit for consumption. Therefore, there is an urgent and growing need to
address the issue of water resource management in a sustainable manner and stop waste disposal in water bodies.

PESTLE highlights
Political landscape
 According to Worldwide Governance indicators, published by the World Bank, India was in the 60.59 percentile
in the voice and accountability parameter in 2015. Voice and accountability measures the extent to which a
country's citizens are able to participate in selecting their government, as well as freedom of expression,
freedom of association, and freedom of the media. India ranked high due to its deep-rooted democratic
principles and respect for freedom of expression and the media. In comparison, China scored low percentile
rank of 4.93 in the same year.
 Apart from many economic policies, the BJP government passed goods and service (GST) bill in parliament in
2016. The GST is considered to be the biggest reform in the indirect tax structure since the opening up of
economy in early nineties. Secondly, on 8th November 2016, the Reserve Bank of India (RBI) and the
government demonetized INR500 and INR1,000 notes.
Economic landscape
 India’s current account deficit has improved considerably from a high of 4.8% of GDP in 2012 to 1.7% of GDP in
2013, according to the IMF. Additionally, softened crude oil prices and weakened commodity prices also helped
India to narrow the deficit. Deficit has come down to 1.3% of GDP for 2014 and further declined to 1.25% of
GDP in 2015, basically due to fall in commodity prices world over.
 High tax rates, delay in passage of key reforms, infrastructure bottlenecks, high insolvency and debt recovery
status continue to hurt India’s global image in the short run. Much is expected in the remaining tenure of the
current government in order make India’s pitch stronger in the world as a business friendly destination.
Social landscape
 According to MarketLine, around 66.1% of the Indian population was in the 15–64 age group, 5.9% was in the
65 and above group, and the remaining 28% belonged to the 0–14 age group, in 2015. The median age in India
was 27.6 years in 2016, according to CIA – The World Factbook, which indicated a young population.
 According to MarketLine, public expenditure on education remained low at 4.04% of GDP in 2014, especially
considering the low literacy rates in the country. The literacy rate for people above the age of 15 stood at 71.2%
in 2015, according to CIA–The World Factbook. There were 81.3% literate males as compared to only 60.6%
literate females in 2015.
Technological landscape
 India’s gross expenditure on R&D as a percentage of GDP was around 0.8% in 2011, according to the World
Bank. This was lower than those of the other BRIC economies China (2% in 2014), Russia (1.2% in 2014), and
Brazil (1.2% in 2013).
 In terms of securing patents, India has traditionally been very slow, but recent years have seen a consistent
improvement. The number of patents received by India from the United States Patent and Trademark Office
(USPTO) has increased from 1,098 in 2010 to 3,355 by 2015. However, in comparison to China the number of
patents remains very low.

Legal landscape
 According to the World Bank's 2017 Doing Business report, time to start a business, enforcement of contracts,
dealing with construction permits, and paying taxes are the key constraints to doing business in India. Overall,
the country has been ranked 130th out of 190 countries.
 The new Companies Act aims to improve corporate governance by introducing a more effective legal and
administrative framework; nevertheless, corporate governance is largely driven by factors such as companies’
commitment to the principles of integrity and transparency in business operations.
Environmental landscape
 India has been a poor performer on the Environmental Performance Index (EPI). In an EPI study published in
2016, India was ranked 141st out of 180 countries, which shows that India needs to do more in terms of
preserving its environmental landscape.
 According to the World Bank, the CO2 intensity, i.e. CO2 emission from the solid fuel mainly from coal, stood at
2.62 (kg of oil equivalent energy use) in 2013.
Key fundamentals
Table 1: India – key fundamentals
2014 2015 2016f 2017f 2018f 2019f 2020f

GDP, constant 2005 prices ($ billion) 2.2 2.4 2.5 2.7 2.9 3.2 3.4
GDP growth rate (%) 7.24 7.57 7.43 7.47 7.57 7.66 7.65
GDP, constant 2005 prices, per capita ($) 1290.11 1366.73 1449.97 1540.75 1638.87 1746.35 1863.69
Inflation (%) 6.35 5.87 5.70 5.36 5.32 5.28 5.24
Exports (total as a percentage of GDP) 22.91 21.62 20.45 19.33 18.16 17.01 15.68
Imports (total as a percentage of GDP) 29.29 26.84 25.35 23.93 22.47 21.01 19.35
Mobile penetration (per 100 people) 74.01 75.37 76.35 77.05 77.54 77.90 78.15
Source: Country Statistics, MarketLine MARKETLINE

TABLE OF CONTENTS
Overview .................................................................................................................................................................... 2
Catalyst ........................................................................................................................................................................... 2
Summary ......................................................................................................................................................................... 2
Key findings ................................................................................................................................................................. 2
PESTLE highlights ......................................................................................................................................................... 6
Key fundamentals ........................................................................................................................................................ 7
Key Facts and Geographic Location ...........................................................................................................................15
Key facts ........................................................................................................................................................................ 15
Geographical location ................................................................................................................................................... 16
PESTLE Analysis .........................................................................................................................................................17
Summary ....................................................................................................................................................................... 17
Political analysis ............................................................................................................................................................ 18

Overview.................................................................................................................................................................... 18
Current strengths ...................................................................................................................................................... 18
Current challenges ..................................................................................................................................................... 19
Future prospects ....................................................................................................................................................... 21
Future risks ................................................................................................................................................................ 23
Economic analysis ......................................................................................................................................................... 24

Overview.................................................................................................................................................................... 24
Future risks ................................................................................................................................................................ 29
Social analysis ............................................................................................................................................................... 31

Overview.................................................................................................................................................................... 31
Future risks ................................................................................................................................................................ 39
Technological analysis................................................................................................................................................... 42
Overview.................................................................................................................................................................... 42
Future risks ................................................................................................................................................................ 46
Legal analysis ................................................................................................................................................................ 48

Overview.................................................................................................................................................................... 48
Future risks ................................................................................................................................................................ 53
Environmental analysis ................................................................................................................................................. 54

Overview.................................................................................................................................................................... 54
Future risks ................................................................................................................................................................ 58
Political Landscape ....................................................................................................................................................59
Summary ....................................................................................................................................................................... 59
Evolution ....................................................................................................................................................................... 59
Pre-1950s................................................................................................................................................................... 59
1950–90 ..................................................................................................................................................................... 59
1991–2003 ................................................................................................................................................................. 60
2004–2016 ................................................................................................................................................................. 61
Key political figures ................................................................................................................................................... 62
Structure and policies .................................................................................................................................................... 62

Structure of government ........................................................................................................................................... 62
Key policies ................................................................................................................................................................ 64
Economic ................................................................................................................................................................... 64
Social ......................................................................................................................................................................... 64
Foreign ....................................................................................................................................................................... 65
Performance .................................................................................................................................................................. 65
Governance indicators............................................................................................................................................... 65
Outlook .......................................................................................................................................................................... 66
Economic Landscape..................................................................................................................................................67
Summary ....................................................................................................................................................................... 67
Evolution ....................................................................................................................................................................... 67
1947–90 ..................................................................................................................................................................... 67
1991–2015 ................................................................................................................................................................. 67

Financial system ........................................................................................................................................................ 69
Performance .................................................................................................................................................................. 70
GDP and growth rate ................................................................................................................................................. 70
Fiscal situation ........................................................................................................................................................... 76
External position ........................................................................................................................................................ 76
International investment position ............................................................................................................................. 77
Monetary situation .................................................................................................................................................... 78
Indian stock markets ................................................................................................................................................. 79
Outlook .......................................................................................................................................................................... 79
Social Landscape........................................................................................................................................................81
Summary ....................................................................................................................................................................... 81
Evolution ....................................................................................................................................................................... 81
Family welfare plans .................................................................................................................................................. 81
Social security reforms in India ................................................................................................................................. 81

Education ................................................................................................................................................................... 84
Healthcare ................................................................................................................................................................. 85
Social welfare ............................................................................................................................................................ 86
Performance .................................................................................................................................................................. 86
Healthcare ................................................................................................................................................................. 86
Income distribution ................................................................................................................................................... 88
Education ................................................................................................................................................................... 88
Outlook.......................................................................................................................................................................... 89
Technological Landscape ...........................................................................................................................................90
Summary ....................................................................................................................................................................... 90
Evolution ....................................................................................................................................................................... 90
IT ................................................................................................................................................................................ 90
Telecommunications ................................................................................................................................................. 90

Intellectual property .................................................................................................................................................. 90
R&D............................................................................................................................................................................ 91
Technology agreements and pacts ............................................................................................................................ 91
Performance .................................................................................................................................................................. 91
Important sectors ...................................................................................................................................................... 91
Research & Development .......................................................................................................................................... 93
Outlook .......................................................................................................................................................................... 93
Legal Landscape.........................................................................................................................................................94
Summary ....................................................................................................................................................................... 94
Evolution ....................................................................................................................................................................... 94

Judicial system ........................................................................................................................................................... 94
Relations between the central government and the states ...................................................................................... 95
Tax regulations .......................................................................................................................................................... 95
Labor law ................................................................................................................................................................... 96
Social security ............................................................................................................................................................ 96
Performance .................................................................................................................................................................. 96
Effectiveness of the legal system .............................................................................................................................. 96
Outlook .......................................................................................................................................................................... 97
Environmental Landscape..........................................................................................................................................98
Summary ....................................................................................................................................................................... 98
Evolution ....................................................................................................................................................................... 98

Environmental regulations ........................................................................................................................................ 99
Environmental actions ............................................................................................................................................. 100
Participation in global efforts, agreements, and pacts............................................................................................ 100
Performance ................................................................................................................................................................ 101

Environmental impact ............................................................................................................................................. 101
Outlook ........................................................................................................................................................................ 102
Appendix .................................................................................................................................................................103
ISO codes of selected countries ................................................................................................................................... 103
Ask the analyst ............................................................................................................................................................ 104
Disclaimer.................................................................................................................................................................... 104

LIST OF FIGURES
Figure 1: Map of India 16
Figure 2: Market capitalization (As percentage of GDP), 2015 26
Figure 3: Agriculture value added 27
Figure 4: Youth Unemployment - 2014 28
Figure 5: Increasing Business extent of disclosure index and declining cost of business start-up
procedures 29
Figure 6: Growing domestic credit and non-performing loans 30
Figure 7: Median age of BRICS 32
Figure 8: Foreign Tourist Arrivals (FTAs) in India 33
Figure 9: International tourism receipts and expenditure - 2014 34
Figure 10: Health expenditure per capita in BRICS - 2014 35
Figure 11: Growing urban population 36
Figure 12: Average house price index 37
Figure 13: Adult literacy rate and youth gender parity index - 2015 38
Figure 14: Infant mortality rate 39
Figure 15: Employment to population ratio - 2014 41
Figure 16: Growing digital transactions - 1 44
Figure 17: Growing digital transactions - 2 45
Figure 18: High-technology exports (% of manufactured exports) - 2015 47
Figure 19: Taxes on international trade 50
Figure 20: Charges for the use of intellectual property 51
Figure 21: Annual freshwater withdrawals and water productivity- 2014 56
Figure 22: CO2 intensity 57
Figure 23: India – key political events since independence 60
Figure 24: India – key political figures 62
Figure 25: Composition of Indian parliament after April–May 2014 elections 64
Figure 26: Historical GDP growth in India, 2005–2015 68
Figure 27: GDP and GDP growth rate in India, 2010–20 71
Figure 28: GDP composition by sector in India, 2015 72
Figure 29: India’s agricultural output, 2010–15 73
Figure 30: India’s industrial output, 2010–15 74

Figure 31: India’s services output, 2010–15 75
Figure 32: India’s external trade, 2011–15 77
Figure 33: Consumer price index and consumer price index-based inflation in India, 2010–20 79
Figure 34: Major religions in India as of 2011 84
Figure 35: Healthcare expenditure in India, 2008–14 87
Figure 36: Public education expenditure in India, 2010–14 89
Figure 37: Internet users in India, 2010–14 92
Figure 38: CO2 emissions in India, 2006–13 101

LIST OF TABLES
Table 1: India – key fundamentals 7
Table 2: India – key facts 15
Table 3: Analysis of the Indian political landscape 18
Table 4: Analysis of the Indian economy 24
Table 5: Global workforce (millions), 2014–19 25
Table 6: Percentage of population between 15-64 age group 25
Table 7: Analysis of the Indian social system 31
Table 8: Analysis of the Indian technological landscape 42
Table 9: Analysis of the Indian legal landscape 48
Table 10: Analysis of Indian environmental landscape 54
Table 11: Fiscal balance in India 76
Table 12: Foreign exchange reserves in India 78
Table 13: Mid-year population by age (% of total population), 2015 83
Table 14: Patents granted by USPTO, 2010–15 93

Key Facts and Geographic Location
KEY FACTS AND GEOGRAPHIC LOCATION

Key facts
Table 2: India – key facts
Country and capital

Full name Republic of India
Capital city New Delhi
Government
Government type Democracy
Head of state President Pranab Mukherjee
Head of government Prime Minister Narendra Modi
Population (2016 est.) 1.26 billion
Currency Indian rupee
GDP per capita (PPP) (2015 est.) $6,200
Internet domain .in
Demographic details
Life expectancy (2016 est.) 68.5 years (total population)
67.3 years (men)
69.8 years (women)
Ethnic composition (2000 data) Indo-Aryan (72%), Dravidian (25%), Mongol and other (3%)
Major religions (2011 census) Hindu (79.8%), Muslim (14.2%), Christian (2.3%), Sikh (1.7%), other
and unspecified (2.0%)
Country area 3.287 million square kilometers
Languages (2001 census) Hindi (41%), Bengali (8.1%), Telugu (7.2%), Marathi (7%), Tamil
(5.9%), Urdu (5%), Gujarati (4.5%), Kannada (3.7%), Malayalam
(3.2%), Oriya (3.2%), Punjabi (2.8%), Assamese (1.3%), Maithili
(1.2%), other (5.9%)
English enjoys the status of subsidiary official language but is the
most important language for national, political, and commercial
communication
Exports Petroleum products, precious stones, machinery, iron and steel,

chemicals, vehicles, apparel, cereals and pharmaceutical products
Imports Crude oil, precious stones, machinery, fertilizer, iron and steel,
chemicals and plastic
Source: CIA – The World Factbook MARKETLINE

Key Facts and Geographic Location
Geographical location
The Indian peninsula is separated from Mainland Asia by the Himalayas. The country is surrounded by the Bay of Bengal
to the east, the Arabian Sea to the west, and the Indian Ocean to the south. India borders Afghanistan and Pakistan to
the northwest; China, Bhutan, and Nepal to the north; and Myanmar and Bangladesh to the east. Sri Lanka is separated
from India by a narrow channel of sea formed by the Palk Strait and the Gulf of Mannar.
Figure 1: Map of India

PESTLE Analysis
PESTLE ANALYSIS
Summary
India is the second most populous nation in the world, with more than 1.2 billion people. Democracy is deeply entrenched
in its political system, but is often constrained by social tensions due to religious, caste and linguistic differences. On the
political front, the new government led by Mr. Modi has revived investment sentiment in the country. On the foreign policy
front, economic liberalization and bilateral trade have brought the nation closer to North America and Western Europe.
However, India’s relations with its neighbor Pakistan remain volatile, and terrorism continues to beleaguer the country’s
security.
India’s large workforce, the size of which is second only to China, characterizes its economy. Moreover, a large well-
educated and English-speaking population has made India the foremost hub for IT and ITes. India is also among the top-
five producers of pharmaceutical drugs by volume, where most of the companies dominate in the generics space.
However, the Indian economy has proven to be susceptible to external shocks in recent times, and the major reasons
cited for this vulnerability are India’s fiscal and current account deficits, although both have improved of late. Moreover,
poor infrastructure and high levels of corruption have also crippled economic growth and investment. Although public-
sector banks have lent enough in the last fourteen years to spur infrastructure investment, regulatory barriers and long
gestation periods have created a troublesome situation for banks and their borrowers in the sector.
On the social front, the government has launched a nationwide scheme to provide at least 100 days of guaranteed
employment every year to support its large, unskilled rural population. Despite the introduction of several new social
welfare schemes, India continues to perform poorly on social indicators, which is mainly attributed to its poor healthcare
and educational infrastructure. Rapid urbanization has put excessive pressure on urban planning and infrastructure, and
has drastically increased real estate prices in major cities such as Mumbai and Bangalore.
On the technological front, India has made significant progress. This is reflected by a sizable increase in the number of
technology institutions and number of patents approved in the country. However, the Indian education system’s
emphasis on rote-learning rather than experience and exploration, and the ease with which educational institutes can be
started have raised questions about the employability of graduates. Although the government has been proactive in its
attempts to stimulate growth in the technology sector, the country’s R&D expenditure, at below 1% of GDP, is much
lower than other emerging markets, such as Brazil and China. As a result, India’s proportion of high-tech manufactured
exports, which are products with high R&D intensity, has lagged behind its peers.
A comprehensive legal and regulatory framework has made it possible for business entities in India to grow their
business. Judicial delays continue to cause problems, with a staggering number of unresolved cases piling up in the
courts; however, the judiciary is considered fair and competent. Weak IPR laws have resulted in soaring piracy across
entertainment, business software, the Internet and books. Restrictive trade and foreign investment regimes are delaying
India from gaining the advantages of assimilation with a globalized economy, although prospects are brighter since the
Modi government has promised to create a more investor friendly regulatory structure.
India’s growing population has placed an excessive burden on natural resources such as water, forests, sand, rocks and
minerals, and on environmental quality. Although India is home to rich biodiversity and has a strong environmental policy
framework in place, the desired results are yet to be achieved at ground level. Corruption and political interference at the
local level, coupled with an extremely slow legal system, often result in environmental crimes being ignored. Dependence
on fossil fuels for the nation’s increasing energy demands has increased India’s share of global greenhouse emissions,
and affected its air quality.

PESTLE Analysis
Political analysis
Overview
Democracy is the focal point of the Indian political system, but is often constrained by social tensions due to religious,
caste and linguistic differences. Some of the communal flare-ups—such as the Babri Masjid issue in 1992, the Godhra
incidents in 2002, and the large exodus of India’s northeastern migrants from the southern cities in 2012 due to fear of
attacks by Muslims—have rocked the country in the past. In addition, the bifurcation of the erstwhile Andhra Pradesh into
two states—the new state of Telangana and the residual state of Andhra Pradesh—in southern India has brought
intensified demands for new states in other parts of the country, either on ethnic lines or for better administration.
On the political front, India continues to suffer from high levels of corruption. The second term of former Prime Minister
Manmohan Singh was marred with corruption scandals amid high-level investigations and arrests, including irregularities
involving the Commonwealth Games, 2G spectrum licensing, and the cash for votes incident. The current government is
facing challenges due to poor execution of demonetization and corruption allegations.
On the foreign policy front, economic liberalization and bilateral trade have brought the nation closer to North America
and Western Europe. The country is also seeking to develop strong relationships with the South East Asian countries
and oil-rich Gulf Cooperation Council nations to gain trade advantages. However, India’s relations with its neighbor
Pakistan remain volatile, and terrorism continues to plague the country’s security.
Table 3: Analysis of the Indian political landscape
Current strengths Current challenges

▪ Strong democratic setup ▪ Terrorism
▪ Foreign policy ▪ Lack of a comprehensive peace deal with Pakistan
▪ Engagement with Europe and Canada ▪ Allegations of corruption
▪ Inept implementation of demonetization
Future prospects Future risks

▪ Strong and stable government ▪ Intensifying demand for new states
▪ Better relations with its smaller immediate neighbors ▪ Social and communal tensions
▪ Stronger relations with Japan
▪ Improved accountability of government
Source: MarketLine MARKETLINE
Current strengths
Strong democratic setup
India is the largest democratic nation in the world and principles of democracy are deeply entrenched in the Indian
political system. Indian diversity is reflected in the federal political structure of government, where power is shared
between states and the center. There are national level elections, state level elections, municipal elections and
panchayat (village) level elections, all of which require citizens to exercise their vote. As per the World Bank’s Worldwide

PESTLE Analysis
Governance Indicators, India ranked in the 60.59 percentile in voice and accountability in 2015. Voice and accountability
measures the extent to which a country's citizens are able to participate in selecting their government, as well as freedom
of expression, freedom of association and freedom of the media. India ranks high due to its deep-rooted democratic
principles and respect for freedom of expression and the media. In comparison, China and Russia scored percentile
ranks of 4.93 and 19.21, respectively, in the same year.
Foreign policy
After a period of distinct communist/socialist bias, India has gradually warmed up to Western Europe, the US and
Canada. This is reflected in the number of agreements signed between India and the nations of these regions, the most
significant example being the Indo-US civil nuclear deal. In addition, the US president has backed the idea of India’s
permanent membership in the United Nations Security Council, which underscores India’s strong bilateral ties with the
US. India is also working on free-trade agreements (FTA) with Canada and the EU to liberalize trade further and
strengthen its bilateral relationships with the two regions. In October 2015, in a three day visit of the German Chancellor,
Angela Merkel, and both the countries concluded a host of bilateral agreements. Lot of intent was shown to deepen
commercial ties and foster environmental co-operation.
Through its “Look East” policy, India has also sought to develop strong relationships with South East Asian countries.
India has already signed two FTAs with the ten-member ASEAN countries in the last three years. The first agreement,
signed in 2010, liberalized trade of goods, while the most recent one in December 2012 liberalized bilateral investment
flows and services. India wants to enhance this strategic partnership with the ASEAN countries by entering into another
regional trade agreement, the Regional Comprehensive Economic Partnership (RCEP), which involves five other
countries—Australia, China, Japan, New Zealand and South Korea—apart from the ten-member group. The proposed
trade agreement is currently being negotiated. Moreover, India is also developing its ties with the six-member Gulf Co-
operation Council (GCC).
Engagement with Europe and Canada
In April 2015, Mr. Narendra Modi visited Germany, France and Canada on an eight day transatlantic tour. It marked his
first trip to Europe and second to North America. With the inclusion of Canada in the tour, it was clear that the prime
minister wanted to revamp the economic and political ties with the three countries, which are constituents of the G7
group of nations, and potential partners of the Indian growth story.
The highlight of the French trip was the announcement to procure 36 Rafale fighter jets in working condition, in order to
strengthen the capability of aerial defense in the country. In the past few years, India has seen its squadron strength
declining from 39 to 34. Besides, the two countries also signed deals relating to nuclear and renewable energy co-
operation. In Germany, the prime minister and his German counterpart, Angela Merkel, jointly led the inauguration of
Hannover Messe, the largest industrial trade fair. In the inaugural speech the prime minister advocated his “Make in
India” speech, assuring investors that in his regime the business environment will be stable and they can take advantage
of India’s high skilled and cheap workforce. Canada witnessed its first bilateral visit by an Indian prime minister in 42
years. Canada secured a deal worth $280 million to supply uranium to India. These countries also agreed on a deal to
foster co-operation in fields like energy and counter-terrorism.
Current challenges
Terrorism
The terrorism threat posed by religious extremist groups, violence by Naxalites, and insurgent activities in the northeast
dominate Indian security concerns. India has been fighting terrorism since the early 1980s. The country faces threats

PESTLE Analysis
from Kashmiri separatists in the north and militants in the northeast, while the Naxalites—an ultra-left radical group that
has taken up arms against the state—affect 106 of the 629 districts in India. Islamic terror groups, believed to have
support from Pakistan’s Directorate for Inter-Services Intelligence, have expanded their network across the country;
bomb attacks in the states of Maharashtra, Uttar Pradesh, and Andhra Pradesh clearly indicate that the network is broad.
In 2016, Pakistan was allegedly involved in a major attack at Pathankot Air Force Station, Punjab. In addition, the smaller
skirmishes continues in the Kashmir valley. India continues to face terrorist threats both internally and externally.
Lack of a comprehensive peace deal with Pakistan
Strained relations with Pakistan have plagued regional stability since the 1947 partition. India has fought four wars with
its neighbor over the disputed region of Kashmir (in 1947, 1965, 1971, and most recently 1999). Moreover, India has also
accused Pakistan of aiding and abetting terrorism in the country and the relations took a turn for the worse after the 2008
terrorist attacks in Mumbai. After the attacks, India went on a diplomatic offensive against Pakistan, which forced the
latter's former interior minister Rehman Malik to admit that the attacks were partially planned in Pakistan and that some
of its citizens were among the perpetrators. Since then, Pakistan’s lack of substantial progress in the Mumbai attack
investigations has added to the roiling of bilateral relations.
Although India's foreign secretary resumed dialogue with Pakistan in the last week of February 2010, the talks ended
inconclusively. The talks resumed in July 2011 and were hailed as a new era in bilateral ties. The talks, widely seen as a
slight thaw in bilateral ties, were followed by former President Asif Ali Zardari’s visit to New Delhi in April 2012, which
marked the first visit by a Pakistani head of state to India in seven years. The visit resulted in the two countries making
decent progress in liberalization of trade and movement of people across the border. However, the consistent breach of
2003 ceasefire agreement by Pakistani troops and a series of border skirmishes between the two armies along the Line
of Control (LoC), the countries’ de-facto border, continue as of October 2014. The skirmishes have led to a deterioration
of relations with Pakistan. In October 2015, Pakistan’s ambassador to the UN (United Nations) presented a dossier to the
UN secretary general which shows India’s involvement in causing instability in the Baluch region of Pakistan, which is
known for its ethnic insurgency. This dossier counters the claim of India as the victim of terrorism in Pakistan. This move
has sparked fresh tensions between both sides, putting pressure on India to restart negotiations. The dossier has
negated any positive developments that could have been expected from both sides, following the meeting of both the
prime ministers in July 2015. In September 2016, India claimed that it had carried out surgical strikes on militants in
disputed Kashmir territory with Pakistan. Although Pakistan denied any such incident, but tensions in the Kashmir valley
have surely escalated.
Allegations of corruption
India continues to suffer from high levels of corruption and yet lacks the political will to implement tough new policies.
Transparency International, a corruption watchdog, ranked India at 76th out of 168 countries in 2015. According to
Global Corruption Barometer 2013, 65% of respondents in India felt that public officials and civil servants were
corrupt/extremely corrupt, 86% felt that political parties were corrupt/extremely corrupt, 65% felt that
parliament/legislature was corrupt/extremely corrupt and 75% felt that police were corrupt/extremely corrupt. In addition,
the survey revealed that 40% of the respondents felt that over the past two years the level of corruption in India has
increased a lot.
Major corruption scandals concerning the Commonwealth Games, the 2G spectrum sale, a property scam in Mumbai,
improper allocation of coal blocks and many more have emerged in this period. These scandals have tarnished the
image of political parties, bureaucracy and the government and have led to nationwide protests. Following a weeklong
hunger strike by activist Anna Hazare, the former government tabled the Jan Lokpal Bill (the citizen's ombudsman bill) in

PESTLE Analysis
parliament, and although it was passed in the lower house of parliament in its 2011 winter session, approval from the
upper house has been pending for two years. The Jan Lokpal Bill is a draft anti-corruption bill drawn by prominent civil
society activists and retired judges to make the functioning of the government more transparent and accountable to the
public. The bill seeks to appoint a Jan Lokpal at the national level supported by a Lokayukta at the state level to serve as
independent bodies in the investigation of corruption cases.
Inept implementation of demonetization
On 8th November 2016, the central bank and the government banned old INR500 and INR1,000 currency notes and
issued new currency notes of INR500 and INR 2,000. The maximum limit to withdraw money per person per day was
less than INR4,500 ($66.68) from bank or INR2,500 ($37) from cash machines. According to Mr. Modi, the objective of
the sudden announcement without any prior notice is to get control over black money, tax evasion, corruption and
counterfeit currency. India have more than 86% of cash circulation in the economy in INR500 and INR1,000
denominated notes, according to various estimates. A sudden swap of old currency generated kiosk and panic in the
country. Apart from some initial exemptions, the prime minister gave 50 days (until 30th December 2016) to exchange
old currency notes with the new one. However, it seems that the government failed to execute the plan since people are
not able exchange their money due to long queues in the banks and ATMs because of the limited inventory cash with the
banks. Most of the ATM machines do not have cash or they need to be upgraded with new currency notes boxes.
Furthermore, majority of the population is not literate enough to withdraw cash from the ATMs or do not have easy
access to the banks, especially in rural areas.
In the first month of the scheme, only around $62 billion of new currency was in circulation, according to RBI. According
to various sources, it is estimated that the Modi government will need at least 3–4 months to deal with the cash crunch in
the country where more than 98% of the volume of the transactions dealt only in cash. There are several deaths reported
due to the limited access of cash as well as attempt to acquire cash from the banks. Many of the major political parties
opposing the government stalled both houses of the parliament for more than two weeks in the winter session. In
addition, the income tax department is continuously raiding suspected black money hoarders. Within a month of the
implementation of the scheme, income tax raids across the country found millions of new currency notes in possession of
some people. The possession of that large amount of new currency notes has sparked fresh controversy, because of the
withdrawing limits set by the government. Therefore, the opposition parties are accusing the government for internally
leaking the information of demonetization before announcing it to the public.
Future prospects
Strong and stable government
There is political stability in the country, with the government enjoying a strong majority in parliament. The center-right
BJP government is not dependent on the support of other parties in parliament to pass legislation. Accounting for 282 of
the 545 seats, the government is in a strong position in parliament. The government’s significant majority in the
parliament enables it to pass legislation without the support from the opposition.
Better relations with its smaller immediate neighbors
The new government headed by Prime Minister Narendra Modi has been very pro-active in building foreign relations
since coming to office in mid-2014, especially with its immediate neighbors. All the leaders of the member states of the
South Asian Association for Regional Co-operation (SAARC) were invited to his swearing-in ceremony, including
Pakistan. The invitation signaled Mr. Modi’s interest in building trust among the country’s immediate neighbors.
Additionally, since coming to power, Mr. Modi has visited both Nepal and Bhutan to build better relationship with them.

PESTLE Analysis
The new government offered an extra $1 billion line of credit to Nepal and signed other developmental projects. Similarly,
Mr. Modi made his first foreign trip after becoming prime minister to Bhutan to show the importance of Bhutan to India.
The government has also signed assistance projects and announced measures related to trade and education. The
measures will help India strengthen ties with its neighbors in the future.
In September 2015, Sri Lankan Prime Minister, Ranil Wickremesinghe, made his first trip to India, after being sworn in as
prime minister in August 2015. He met his Indian counterpart, Mr. Modi, and signed a total of four agreements in sectors
of healthcare and space science. Both leaders also discussed the devolution of powers to the Tamils in the eastern and
northern provinces of Sri Lanka. Discussions also covered the long standing dispute between Indian fishermen and
Lankan authorities over fishing rights in the Palk bay and Palk Strait. Moreover, the Comprehensive Economic
Partnership Agreement (CEPA) was discussed, with hopes that Sri Lanka will join it by year-end.
Stronger relations with Japan
In September 2014, Mr. Modi made a trip to Japan to further security co-operation and economic ties. Relations between
the two leaders have been strong for a long time, since Mr. Modi was the chief minister for the state of Gujarat. In fact,
Japanese firms have invested heavily for a long time in the state of Gujarat. The stronger ties can be seen as a win-win
situation for both countries. India needs technology and capital for the implementation of infrastructure projects, which
Japan can provide, while Japanese companies and investors hope these investments would help them tap into a large
and a growing market. Moreover, the history of hardly any dispute between the two nations makes Japan an ideal foreign
partner for India in terms of both economic and political ties. Mr. Modi has announced “red carpet” treatment for
Japanese investors investing in India. In his latest trip, Mr. Modi secured Japanese investments and loans totaling
JPY3.5 trillion ($30.52 billion) spread over the next five years, intended towards infrastructure projects, development of
“smart cities” etc. In a separate agreement, Japan secured the export of 2,500 tons of rare earth minerals annually from
India. The deal will help Japan reduce its dependence on China, which boasts of huge deposits of rare earth minerals
that are intensively used in the manufacture of electronic items and clean technology.
On the political front, the meeting has captured lot of media attention. Mr. Modi and Mr. Abe (prime minister of Japan)
share similar ideologies and have much in common. The prime ministers of both the nations—being conservative
nationalists—have advocated a muscular approach towards foreign policy and reviving nationalists’ sentiments. In the
meet, both leaders emphasized stronger co-operation with the US. Both are wary of China and the emphasis on strong
security co-operation between the two nations in the latest meet is seen as a balancing act to contain China’s rise.
Nevertheless, India was careful not to be seen as building stronger ties with Japan as a concerted effort to counter
China’s expansionary policies, which has had lot of territorial and maritime disputes of late with other South East Asian
nations. This was because Chinese President Xi Jinping was to visit India in the same month and India was expecting a
lot of investments from China. Eventually China agreed to invest around $20 billion over the next five years in
infrastructure. Although economic ties with China have become stronger, diplomatic ties remain fragile owing to the
border dispute. In 2015, India signed a deal with Japan to build its first bullet train project connecting Mumbai and
Ahmedabad, which is expected to get a funding of around $8 billion from Japan. In addition, the two countries signed a
nuclear deal in November 2016, to sell civil nuclear power equipment and technology to India.
Improved accountability of government
The accountability of political parties and their leaders has been improving over the last few years. It is mandatory for
candidates to disclose their wealth and sources of income. Political parties are also required to disclose details of party
funding above a certain threshold and file income tax returns on an annual basis. Both the Election Commission and the
media have made significant efforts to educate the public about the electoral process, candidates' backgrounds, and the

PESTLE Analysis
points of view of the various political parties. All of this is leading to a heightened awareness of the political system,
which is expected to have a positive effect on the quality of candidates elected to govern the country. In addition, India
has a central agency known as the Central Vigilance Commission, which monitors government accounts and activities
and produces periodic reports. The reports are accessible through the agency's website. If they are not made public, the
reports can be accessed through the Right to Information (RTI) Act.
Independent constitutional authorities that are mandated to audit government accounts and offices such as the
Comptroller and Auditor General’s (CAG) Office have also brought enhanced accountability and transparency to the
system. Over the last three and a half years, this office has increased the number of performance audits with the
intention of discovering if public funds are used economically, efficiently and for the intended purpose. The 2G scandal,
where 2G spectrum was awarded to entities with no prior experience at below market rates, was unearthed for the first
time in a Comptroller and Auditor General's Office report. Moreover, the office has also reported improper allocation of
coal blocks to private entities, at an estimated loss of INR1.76 trillion ($26.08 billion) to the government exchequer.
The proposed Jan Lokpal Bill aims to serve as an independent citizen's ombudsman body, and will have powers to
register and investigate complaints against politicians and public servants. Many citizens, citizen groups and media
figures are becoming increasingly active in pursuing and bringing about better public accountability.
Future risks
Intensifying demand for new states
With the former government giving a positive nod to the creation of a separate Telangana state in southern India,
demand for new states in other parts of the country has also intensified. Gorkha people from the eastern state of West
Bengal demand a separate Gorkhaland, while political leaders and activists from the much-neglected and
underdeveloped Vidarbha region insist on separation from the rich western state of Maharashtra. Moreover, there are
demands to split the highest-populated state of Uttar Pradesh into smaller states, with the former chief minister of the
state, Mayawati, having earlier expressed her desire to divide it into four administrative regions for better governance. A
regional party in the northeastern state of Assam, Bodoland’s People Front (BPF), has taken a resolution to revive the
demand for a separate state of Bodoland. Such demands impede the effective functioning of the state.
Social and communal tensions
The Indian community is split by caste and is sub-divided into smaller regional or religious groups, which has historically
led to communal and regional tensions. Some of the communal flare-ups—such as Babri Masjid in 1992, Godhra in
2002, and the large exodus of India’s northeastern migrants from the southern cities in 2012 due to fear of attacks by
Muslims—have affected the entire country in the past. In 2013, communal riots between two communities in the town of
Muzaffarnagar, Uttar Pradesh, left 43 people dead and 93 injured. Such communal flare-ups continued even in 2014,
2015 and 2016 in different parts of India. Most of these issues are said to be the direct result of political parties using
small incidents to fuel regional and national tensions for political gains.
In September 2015, instance of mob violence took place in Dadri village, near Delhi. Allegedly, one community’s mob
lynched a blacksmith from other community, injuring his son in the process. The blacksmith was accused of eating beef.
These attacks took place at the time when the ruling party in itself is voicing concerns about protection of cows. Besides,
states like Maharashtra have already imposed state-wide ban on cow slaughter, while many other states are trying to
emulate the step.

PESTLE Analysis
Economic analysis
Overview
India’s large workforce, the size of which is second only to China, characterizes its economy. Its large, well-educated
English-speaking population has made India the foremost hub for IT and ITes. India is also among the top-five producers
of pharmaceutical drugs by volume. However, the agriculture sector, which employ around 50% of the population, is
highly neglected. The central bank is dovish in order to fuel the growing economy but accompanied by increasing non-
performing loans. Although the new government is promoting pro-growth policies by attracting more investment as well
as supporting domestic companies and startups, there is much more that needs to be done on the economic front.
Table 4: Analysis of the Indian economy

▪ Second largest workforce in the world ▪ Poor agriculture sector performance
▪ Well developed equity market

▪ Pro-growth policies of the new government ▪ Increasing non-performing loans
▪ Promoting business environment
Current strengths
Second largest workforce in the world
India is home to the second largest workforce in the world, which is expected to increase significantly over the next four
decades. This provides India with a significant edge over competitors such as China. In addition, India has a large
English-speaking working population, which gives the country a competitive advantage in sectors such as information
technology (IT), business process outsourcing (BPO) and a multitude of other services.

PESTLE Analysis
Table 5: Global workforce (millions), 2014–19
Size of workforce in 2014 Size of workforce in 2019

China 706.8 683.9
India 437.4 472.2
United States 136.0 140.7
Brazil 94.3 98.7
Russian Federation 66.2 66.7
Germany 36.1 35.1
United Kingdom 28.6 28.9
France 26.3 26.5
Table 6: Percentage of population between 15-64 age group

2015 2020 2025
Brazil 68.8 69.6 69.4
China 72.9 70.2 68.9
France 62.5 61.2 60.3
Germany 65.6 64.2 61.9
India 66.1 67 67.5
Russian Federation 69.7 67.2 65.7
United Kingdom 64.9 63.9 63.1
United States of America 66.1 64.6 63
Grand Total 536.6 527.9 519.8
According to a Planning Commission report in 2012, the labor force in India is expected to swell by more than 30%
during the next 20 years, compared to a decline of 4.0% in industrialized nations and by around 5.0% in China. The
strong growth of the working age population is expected to provide significant and sustained impetus to economic
growth.
Well developed equity market
Indian equity market has shown tremendous improvement over the years, thanks to the regulation by SEBI (Securities
and Exchange Board of India). SEBI is the regulator of securities market in India. Indian equity markets have become
world class, all thanks to the push towards liberalization and solid regulation. Indian equity markets have been termed as
one of the best in Asia, and the recent government’s push to open up the economy has made the markets look all the
more attractive. Stock market capitalization as a percentage of GDP has risen over the recent years. According to the
World Bank, the market capitalization as percentage of GDP stood at 73.1% in India, as compared to China (75.4%),
Russia (29.7%) and Brazil (27.6%) in 2015.

PESTLE Analysis
Figure 2: Market capitalization (As percentage of GDP), 2015
Brazil
80.0
60.0
40.0 27.6
20.0
Russian Federation 29.7 0.0 China

75.4
73.1
India
Source: The World Bank MARKETLINE
Current challenges
Poor agriculture sector performance
According to the World Bank, the agriculture sector employ around 50% of the total employed population in 2013.
However, over the years, there has been no significant improvement in this sector. Agriculture output, which was 26.32%
of GDP in 1990, declined to 21.15% of GDP in 2000 and expected to decline to 15.24% of GDP in 2016, according to
MarketLine. The average annual growth rate of agriculture output was more than 13.3% between 2003 and 2013.
However, it declined to 4.8% in 2014 and 4.9% in 2015, according to MarketLine. In fact, according to the World Bank,
the value added, i.e. the output after all intermediate input deductions, is also showing declining trend. The agriculture
value added, which consisted of at least 29.02% of GDP in 1990, declined to 17.04% of GDP in 2015. The average
annual growth rate of the agriculture value added was just 1.67% in the past four years (2012–15).

PESTLE Analysis
Figure 3: Agriculture value added
30 9
Agriculture, value added (annual %

Agriculture, value added (% of GDP) 8
25 7
20 6
5
15 4
growth)
3
10 2
5 1
0
0 -1
1990 2000 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agriculture, value added (% of GDP)

Agriculture, value added (annual % growth)
Log. (Agriculture, value added (% of GDP))
The poor agricultural performance also reflected in extremely low standard of living of Indian farmers. According to the
Indian Express, farmer suicides in the country increased by at least 40% from 2014 to 2015. According to some
government sources, there were at least 8,000 suicides reported in 2015, as compared to 5,650 suicides in 2014.
Future prospects
Pro-growth policies of the new government
The Modi government came to power based on its pro-growth reform agenda. The decisive win by the ruling BJP will
help to pass politically sensitive reforms, without being held to ransom by the other parties. The new government is
expected to hasten key reforms such as quick approvals of pending projects, reducing subsidies and passing market
liberalizing reforms. Since coming to power, the Modi government has raised the threshold for foreign investors in
several sectors including defense and insurance, although more is expected from him. Moreover, the government also
increased railway fares, which is a laudable move in the right direction. The surge in Indian stock markets since Modi’s
coming to power was a signal of the market’s faith in the government’s strong commitment to bring in economic reforms
to revive growth. Overall, more reforms are expected in the medium term.
Improving business environment
India is the home of more than 1.25 billion people which consist of at least 66.1% of the youth population in 2015,
according to the Marketline. Therefore, tackling unemployment is a major challenge and the country needs to provide
employment opportunities, especially to the youth. According to the World Bank, at least 10.2% males of the total male
labor force were unemployed in 2014, which was relatively less compared to other BRICS nations like Brazil (12.3%),
Russia (12.3%), China (12.1%) and South Africa (48.8%). Similarly, at least 11% females of the total female labor force
were unemployed in the same year.

PESTLE Analysis
Figure 4: Youth Unemployment - 2014
China 12.1
8.5
South Africa 48.8

57.1
Russian Federation 12.3

13.6
Brazil 12.3
19.0
India 10.2
11.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0

Percentage
Unemployment, youth male (% of male labor force ages 15-24)

Unemployment, youth female (% of female labor force ages 15-24)
With the aim of generating employment, the government is promoting business startups and trying to attract more foreign
investments in the country. According to the World Bank, the net FDI inflows as a percentage of GDP increased from
1.3% in 2012 to 2.1% in 2015. FDI inflows during 2015 totaled around $44.2 billion, up from $34.5 billion in 2014 as per
the United Nations Conference on Trade and Development's World Investment Report 2016.

PESTLE Analysis
Figure 5: Increasing Business extent of disclosure index and declining cost of business
start-up procedures
8 45
Cost of business start-up procedures (% of

Business extent of disclosure index (0=less
disclosure to 10=more disclosure)
7 40
6 35
30
5
GNI per capita)

25
4
20
3
15
2 10
1 5
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Business extent of disclosure index (0=less disclosure to 10=more disclosure)

Cost of business start-up procedures (% of GNI per capita)
The government has initiated the ‘Make in India’ initiative to improve the steps of doing business and to attract more
investment in the country. The initiative also encourages domestic companies to increase production and incentives for
startups to generate employment. According to the World Bank, the business extent of disclosure index, which indicates
the investor’s protection through disclosure of ownership and financial information, increased from 2.8 in 2007 to 7.0 in
2016. The higher score reflects higher disclosure. In the same time, the cost of business start-up procedures as
percentage of the GNI per capita decreased from 35.1% to 13.8%. On the other hand, manufactured exports as
percentage of merchandized exports increased from 62.7% in 2008 to 70.60% in 2015.
Future risks
Increasing non-performing loans
India is the fastest growing large economy with more than 7.5% of GDP growth rate in 2015, according to MarketLine.
Therefore to continue with this pace the country need continuous access to internal and external finance. This is evident
from the growing private sector credit to banks. According to the World Bank, the domestic credit to the private sector by
banks increased from 46.22% in 2007 to 52.61% in 2015. On the other hand, the domestic credit provided by financial
sector as percentage of GDP increased from 49.97% in 2007 to 76.75% in 2015. However, non-performing loans to total
gross loans is showing an upward trend and grew from 2.7% in 2007 to 7.57% in 2016. There were many recent cases of
alleged frauds by business owners. In November 2016, State Bank of India (SBI), the largest bank of India, wrote off
INR7,000 crores ($1 billion) to 63 of its 100 willful defaulters. With the lending rate expected to come down gradually over
the years, the demand for loans will increase and therefore the banks needs to be more careful while lending.

PESTLE Analysis
Figure 6: Growing domestic credit and non-performing loans
54 8
Bank nonperforming loans to total

Domestic credit to private sector by 52
7
banks (% of GDP) 6
50
gross loans (%)

5
48 4
3
46
2
44
1
42 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bank nonperforming loans to total gross loans (%)

Domestic credit to private sector by banks (% of GDP)
14.00
12.00 13.02
Lending interest rate (%)
10.00 10.01
8.00
6.00
4.00
2.00
0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: MarketLine analysis using the World Bank MARKETLINE

PESTLE Analysis
Social analysis
Overview
India is the second most populous nation in the world, with more than 1.25 billion people, according to MarketLine. Its
population is young. In order to provide employment to its large unskilled population pool in rural areas, the government
has launched a scheme envisaged to provide at least 100 days of guaranteed employment every year to every
household.
Despite the introduction of several new social welfare schemes, India continues to perform poorly on several social
indicators. India’s low rank is mainly attributed to its poor healthcare and educational infrastructure. Rapid urbanization
has put excessive pressure on urban planning and infrastructure, and has also drastically increased real estate prices in
major cities such as Mumbai and Bangalore. Moreover, more than 15% of Indian districts are under the sway of left-wing
radicals (Naxalites), and it is not surprising that states such as Bihar, Jharkhand and Chhattisgarh are key Naxal
strongholds.
Table 6: Analysis of the Indian social system

▪ Large youth population ▪ Healthcare remains a major concern
▪ Employment guarantee scheme ▪ Rapid urbanization
▪ Growing tourism ▪ Low HDI rank
▪ Literacy level

▪ Jan Dhan Yojana ▪ Government’s authority challenged
▪ Rising life expectancy and falling infant mortality ▪ Employment creation
Current strengths
Large youth population
The median age in India was 27.6 years in 2016, according to CIA – The World Factbook. Around 94.1% of India’s
population was estimated to be less than 65 years old, according to MarketLine. Moreover, 66.1% of the population was
estimated to be in the working-age group of 15–64 in the same year, which results in a low number of dependents on the
working-population.

PESTLE Analysis
Figure 7: Median age of BRICS
Russia
40 39.3
35
30
25
India China
27.6 20 37.1
15
26.8
31.6
South Africa Brazil
In comparison with the four other nations that form the BRICS group, only the South African population is younger.
Moreover, the median age of the Indian population is also lower than the median age of the population of other emerging
markets such as Indonesia and Turkey, which give India a significant edge over other developing and developed nations
in terms of its demographic dividend.
Employment guarantee scheme
In order to tackle the problem of unemployment in rural areas, the government launched the Mahatma Gandhi National
Rural Employment Guarantee Scheme (MGNREGS) in February 2006. The scheme envisaged providing at least 100
days of guaranteed employment every year to every household whose adult members volunteer to perform unskilled
manual work. Only 200 districts were covered in the first phase. The second phase, launched in 2007, included 130 more
districts. As of 2013, 632 districts had been covered under the scheme, which had created 14.37 billion person-days of
work since its inception in 2006–07. During 2013–14, MGNREGS provided employment to 38.1 million households,
generating 1.35 billion person-days of work. Moreover, it has raised the bargaining power of agricultural labor, resulting
in increased income for peasants, besides reducing distress migration. In the union budget for 2011–12, wage rates were
indexed to inflation. The scheme also works on ensuring gender equality, as over 54% of the laborers working in 2013–
14 were women. The program, if implemented properly, is expected to provide gainful employment, and will benefit
unemployed people in rural areas.
Growing tourism
According to the ministry of tourism of India, there were at least 8.3 million foreign tourist arrivals in India in 2015, an
increase of 4.5% from the previous year. The foreign exchange earnings from tourism was estimated to be around
$21.07 billion in 2015, an increase of 4.1% from the previous year. On the other hand, the number of international
departures from India was 20.38 million in 2015. The number of domestic tourist was even higher and increased by
11.1% from 2014 to reach 1,432 million in 2015.
PESTLE Analysis
Figure 8: Foreign Tourist Arrivals (FTAs) in India
9 16
8 14
Number (million) 7 12
Percentage
6 10
5 8
6
4 4
3 2
2 0
1 -2
0 -4
Foreign Tourist Arrivals (FTAs) in India (in million)
Percentage (%) change over

the previous year
Source: Ministry of tourism - India MARKETLINE
According to the World Bank, the international tourism receipts (expenditure by the inbound visitors) as percentage of
total exports was estimated to be at least 4.3% in India, which is higher in comparison to Brazil (2.8%), China (2.3%) and
Russia (3.5%). According to the ministry of tourism of India, the country ranked 14th in the world in terms of tourism
receipt. On the other hand, the international tourism expenditure of India stood at 3.2% in 2014, which is lowest in
comparison to the other BRICS nation, according to the World Bank.

PESTLE Analysis
Figure 9: International tourism receipts and expenditure - 2014
International tourism, receipts (% of total

exports)
India
10.0
8.0
6.0 4.3
9.6 4.0
South Africa Brazil
2.0 2.8
0.0
2.3
3.5
Russian Federation China
International tourism, expenditures (% of total

imports)
India
15.0
10.0
3.2
South Africa 5.0 Brazil
9.4
5.5
0.0
7.3
Russian Federation 12.9 China
Current challenges
Healthcare remains a major concern
Despite innumerable programs, India still faces many health-related problems. India’s current healthcare infrastructure is
inadequate when it comes to meeting the demands of its rising population. According to India's census data from 2011,
more than half of married women in both urban and rural areas are anemic, around one-third of women are underweight,

PESTLE Analysis
and around 41% of children under five are severely and chronically malnourished.
Figure 10: Health expenditure per capita in BRICS - 2014
1000.0 947.43
892.85
Health expenditure per capita (current
900.0
800.0
700.0
600.0 570.21
US$)
500.0
419.73
400.0
300.0
200.0
74.99
100.0
0.0
India China South Africa Russia Brazil
One of the major reasons for this dismal performance on healthcare indicators has been low expenditure on healthcare
by the country’s population. According to MarketLine, total healthcare expenditure as a percentage of GDP stood at
4.01% as of 2014. The country has to take major initiatives to bring healthcare within the reach of the majority of its
citizens. Amongst the BRICS, healthcare expenditure still remains the lowest.
Rapid urbanization
India’s urban areas make a major contribution to the country’s economy. Although less than one third of India’s people
live in cities and towns, these areas generate over two thirds of the country’s GDP and account for 90% of the
government’s revenues. As a result, urban areas have been growing rapidly, with a strong influx from the rural
population. According to the World Bank, at least 32.7% of the population in India was living in urban area in 2015. Out of
the total urban population, at least around 6% was living in the largest cities in 2015, as compared to 3.1% of the
population in China.

PESTLE Analysis
Figure 11: Growing urban population
450 34
33
400 32
Number (million)
31
Percentage
350
30
29
300
28
250 27
26
200 25
1990 2000 2007 2008 2009 2010 2011 2012 2013 2014 2015
Urban population (million) Urban population (% of total)
5.81 5.85 5.90 5.95 5.99

6.00 5.64 5.68 5.72 5.76
5.59 5.62
Population in the largest city (% of urban
5.50
5.00
4.50
population)
4.00
3.50
3.08 3.02 3.03 3.03 3.04 3.06 3.08 3.10 3.11
3.02
3.00
2.61
2.50
2.00
1990 2000 2007 2008 2009 2010 2011 2012 2013 2014 2015
India China
Rapid urbanization has put excessive pressure on urban planning and infrastructure, resulting in cities such as Mumbai
and Bangalore becoming extremely overcrowded. They have also drastically increased real estate prices in major cities
such as Mumbai. Consequently, affordable housing has become a big issue in the cities.

PESTLE Analysis
Figure 12: Average house price index
330
280
Index (2007=100)
230
180
130
80
2007 2011 2012 2013 2014
Hyderabad Chennai Kolkata Mumbai

Bengaluru Delhi Pune
Source: National housing bank - India MARKETLINE
Proliferating slums in big cities such as Mumbai, Hyderabad and Bangalore highlight the need for affordable housing.
The government also has to take action in terms of developing mass transit systems to reduce the pressure on
inadequate road infrastructure in the big cities.
Low HDI rank
India was placed 130th out of 188 countries in 2014 in terms of human development as per the UNDP's Human
Development Report 2015, which was lower than many poor African nations, not to mention Brazil, Russia and China.
This was mainly attributed to India’s poor development in social infrastructure in the areas of health and education. In
order to achieve well-rounded economic development with social justice, it is important that India focuses on removing
the prime causes of poor human development, such as the limited penetration of economic development to the rural
India, the low level of healthcare and sanitation, and the high illiteracy rate.
India underperforms when compared to other countries of BRIC’s in the OECD survey on social institutions and gender
indicator (SIGI). The indicator measures the impact of laws coupled with religious and socio-economic factors on
women’s status.
Literacy level
Although India is approaching near universal enrolment in elementary education and spending on secondary education
has been increased considerably, literacy levels are lower compared to that in other emerging markets. People with
higher education and vocational training are also very ill-equipped and require on the job training. “Secondary Education
for All Action Plan”, launched in 2009, strives to provide universal access to secondary education by 2017. However, the
quality of education continues to be poor. OECD Program for International Student Assessment (PISA) held in 2009, saw
15 year-old students from two Indian states participating, whose performance was found to be far below that of the
OECD average. According to 66th Round of NSS for 2009–10, only 10% of the labor force was vocationally trained, and
only a quarter of them received formal vocational training, according to Planning Commission, 2013. According to the

PESTLE Analysis
World Bank, the adult literacy rate (15 or above age) was one of the lowest amongst the BRICS nations. There were only
72.2% adult literate people in India in 2015, as compared to Brazil (92.6%), Russia (99.7%), China (96.4%) and South
Africa (94.6%). In addition, according the gender parity index of youth literacy, i.e. ratio of youth literate females to youth
literate males, India scored only 0.95 as compared to other BRICS nations. This shows that the nation have the higher
gender disparity in terms of education and the government should focus more on female education.
Figure 13: Adult literacy rate and youth gender parity index - 2015
Adult literacy rate

India
100.0
72.2
80.0
60.0
40.0
South Africa Brazil
94.6 20.0
92.6
0.0
China Russia
96.4 99.7
1.020
1.01 1.01
1.010
Gender parity index (GPI) - Literate
1.00 1.00
1.000
0.990
youth (15-24)
0.980
0.970
0.960
0.95
0.950
0.940
0.930
0.920
India China Russia South Africa Brazil

PESTLE Analysis
Future prospects
Jan Dhan Yojana
In August 2014, the government launched the Jan Dhan Yojana (Scheme for People's Wealth) as a part of its ambitious
financial inclusion program. As a part of the scheme, the government targeted to open 75 million zero balance accounts
by January 26, 2015 with an additional accident insurance cover of INR100,000 ($1,473.5) and a debit card. According to
various estimates, by mid of 2016, more than 220 million accounts were opened under this scheme with more than $5.7
billion deposits. If the owner of the account successfully operates it for six months, he or she will be eligible for INR5,000
($73.68) overdraft facility. The scheme is intended to financially uplift the poor. The government believes the scheme will
help in improving the lives of millions of poor people by bringing them into the financial mainstream, besides giving them
freedom from the controls of usurious moneylenders.
Rising life expectancy and falling infant mortality
Life expectancy in India increased from 59.1 years in 1991 to around 68.5 years in 2016, according to CIA – The World
Factbook. According to the World Bank, the infant mortality rate fell from 88.3 in 1990 to around 37.9 in 2015.
Figure 14: Infant mortality rate
55
51.9
Mortality rate, infant (per 1,000 live
50
50 48.2
46.3
44.4
45
42.6
births)
40.9
40 39.3
37.9
35
30
2007 2008 2009 2010 2011 2012 2013 2014 2015
The government has enacted significant initiatives in rural areas, such as creating a large-scale rural health infrastructure
supported by over 0.5 million trained doctors working under plural systems of medicine and a vast frontline force of
workers, alongside community volunteers. Although life expectancy has doubled since independence, more work has to
be done on this front, as the figures are low compared with other developing nations like China.
Future risks
Government’s authority challenged
The word Naxal refers to militant communist groups, and derives its name from a small town in West Bengal called

PESTLE Analysis
Naxalbari, where the movement originated. The communist rebellion began in Naxalbari and has now spread to East and
Central India. The Naxalites have traditionally targeted the police and government installations. During 2005-13, the
Naxalite movement’s violent activities included the sabotage of government installations such as schools, gram
panchayat buildings, telecommunication towers and railway tracks, as well as attacks on police and politicians. In
February 2010, a group of Naxalite rebels killed 24 Bengali police officers. In April 2010, a planned attack by 1,000
Naxals claimed the lives of 76 security personnel belonging to the Central Reserve Police Force. In May 2013, Naxalites
attacked a convoy of 17 vehicles returning from a rally in Bastar, a remote forested area in the state of Chhattisgarh,
leaving around 28 people dead. Those killed included 12 leaders and workers from the INC, eight police and Central
Reserve Police Force (CRPF) personnel, and four villagers. This marked the first instance of a planned attack by the left-
wing extremists on civilian leaders. During 1989–2013, civilians accounted for more than half of the total causalities.
Similarly, in March 2014, around 20 security personnel were killed in attacks by the Naxalites in the state of Chhattisgarh
in an ambush. In April 2015, seven policemen were killed along with 10 persons in a gun battle with Naxals. Similar
attacks have happened in 2016 too.
What started as an armed struggle between landless peasants and landlords has now matured into the mass-
mobilization of the economically backward class to wage armed war against the government and its projects such as the
special economic zones and the displacement of tribal and forest dwellers for mining and other projects. The Naxalite
movement has brought the concerns of the country's rural poor and tribes to the fore, forcing the government to focus on
strategies aimed at inclusive development.
Experts estimate that Naxalites are present in around 106 of India's 629 districts, and have 9,000-10,000 armed fighters,
6,500 firearms and around 40,000 full-time operatives. Instances of continued violence and mass-mobilization led the
former Prime Minister Manmohan Singh to declare Naxalism as the country's biggest internal security threat.
Employment creation
Under-employment is high in India and the rate of employment creation has not been able to restrict the declining
employment to working age population. This is partly because of women staying out of the workforce in large numbers. A
large chunk of workers, especially those in agricultural and service sectors are not covered under standard labor laws.
NSSO (National Sample Survey Organization) estimated that around 65% of the manufacturing jobs were in firms
employing lesser than 10 employees in 2012. This is basically the “unorganized sector”, which is not covered by the
Employment Protection Legislation (EPL), which applies only to larger firms. According to the World Bank, the
employment to population ratio for the adult population was 52.2% in 2014 as compared to Brazil (65%), Russia (60.5%),
China (68%) and South Africa (39.4%).
In order to tap the demographic dividend and restrict the scenario of losing a generation, job creation has to be stepped
up. Demographics will lead to labor force growth in the coming years. Government forecasts that labor force will increase
by 88 to 113 million during 2010–20.

PESTLE Analysis
Figure 15: Employment to population ratio - 2014
80.0
68.00
Employment to population ratio (15+
70.0 65.00
60.50
60.0
52.20
50.0
years) (%)
39.40
40.0
30.0
20.0
10.0
0.0
South Africa India Russia Brazil China

PESTLE Analysis
Technological analysis
Overview
India has made significant progress in the technology sector. This is reflected by a sizable increase in the number of
technology institutions and number of patents approved in the country. The space research organizations in India are
ranked amongst the top research agencies because of its successful and affordable missions.
The country’s digital currency is showing steady growth over the past few years and got a push after the government and
RBI move to demonetization of INR500 and INR1,000 in November 2016. Strong progress has been made in the
telecom, IT, and IT-enabled services sectors, and the country has received global recognition in these areas. Although
India was a late starter in the biotech sector, it has now established a strong global reputation. The country is also
witnessing rapid growth in areas such as data mining, modeling, and market and equity research. However, the Indian
education system’s focus on rote learning and the ease with which educational institutes can be started have raised
questions about the employability of the Indian technical workforce.
Although the government has been proactive in its attempts to stimulate growth in the technology sector, the country’s
R&D expenditure at 0.8% of GDP is much lower than that of other emerging markets such as Brazil and China. As a
result, India’s proportion of high-tech manufactured exports, which are products with high R&D intensity, has lagged
behind its peers. High-end technological innovation would make India’s exports less vulnerable to price competition.
Table 8: Analysis of the Indian technological landscape

▪ Reputed space research agency ▪ Low expenditure on R&D
▪ Growing digital transactions ▪ The talent pool requires further vocational training

▪ Significant competitive advantage in biotechnology research ▪ Low proportion of high technology exports
▪ Push to urban infrastructure
Current strengths
Reputed space research agency
India has one of the most reputed space agency in the world. The Indian Space Research Organization (ISRO),
headquartered in Bangalore, was formed in 1969. Aryabhata was the first Indian satellite built by ISRO and launched by
th
Soviet Union on April 19 , 1975. Since then, ISRO has been subsequently putting milestones in space research in
launching various satellites. In October 2008, ISRO successfully sent Chandrayaan – 1 in lunar orbit. In September
2014, the Mars orbiter (Mangalyaan) successfully entered Mars orbit, which made India the first country to successfully
place it in first attempt. India became the first Asian country to successfully reach Mars orbit. In addition, the cost of
Indian satellites and orbiter are much cheaper as comparison to other major space agencies around the world. Indian
Mars orbiter’s mission cost was estimated to be around $74 million as compared to NASA’s Maven Mars mission which

PESTLE Analysis
cost them at least $671 million.

Growing digital transactions
The transaction habits of Indians are subsequently getting more digital especially in the past few years. According to the
Reserve Bank of India, transaction volumes and values are booming for cards, POS, ATM and M-Wallets, in addition to
other payment methods. The demonetization move by the government on November 8th 2016 is further expected to
push the usage of digital currency. Since the government and the Reserve Bank of India (RBI) scrapped the INR500 and
INR1,000 notes, the Indian consumer is left with very few options to fulfill his daily needs.

PESTLE Analysis
Figure 16: Growing digital transactions - 1
1200 3000
1000 2500
800 2000
INR billion
Million
600 1500
400 1000
200 500
0 0
2012 2013 2014 2015 2016
Cards volume (million) Cards value (INR billion)
800 2500
700
2000
600
500
INR billion
1500
Million
400
300 1000
200
500
100
0 0
2012 2013 2014 2015 2016
ATM volume (million) ATM value (INR billion)
Source: MarketLine analysis using Reserve Bank of India MARKETLINE
Note: Figures reflects the average of all months of financial year. For
2016, Jan-March average considered
According to various sources, mobile wallets have witnessed a massive rise after the move. According to Technavio, the
mobile wallet market in India is expected to grow at CAGR of 140% by 2020 as compared to the global mobile wallet
market which is expected to grow by CAGR of 34% by 2020. This is also evident from the strong growth of mobile and
internet subscribers over the last few years. According to MarketLine, in 2008, only 4.38% of population was using
internet which increased to 18.02% by the end of 2014. The mobile penetration (per 100 person) on the other hand stood
at 74 in 2014 and is expected to reach 78.14 by 2020.

PESTLE Analysis
Figure 17: Growing digital transactions - 2
140 180
160
120
140
100
120
INR billion
80
Million
100
60 80
60
40
40
20
20
0 0
2012 2013 2014 2015 2016
POS volume (million) POS value (INR billion)
70 30
60 25
50
20
INR billion
40
Million
15
30
10
20
10 5
0 0
2012 2013 2014 2015 2016
M-Wallet volume (million) M-Wallet value (INR billion)
Source: MarketLine analysis using Reserve Bank of India MARKETLINE
Note: Figures reflects the average of all months of financial year. For
2016, Jan-March average considered
Current challenges
Low expenditure on R&D
India’s gross expenditure on R&D as a percentage of GDP was around 0.8% in 2011, according to the World Bank. This
was lower than those of the other BRIC economies China (2% in 2014), Russia (1.2% in 2014), and Brazil (1.2% in

PESTLE Analysis
The talent pool requires further vocational training
India’s education system is significantly biased toward theoretical aspects, with little or no practical training. As a result,
the employability of science and management graduates is lower than expected. According to the IT and BPO trade
association NASSCOM, only 25% of graduates working in IT are readily employable; the proportion is even lower at
approximately 15% for back-office jobs. Moreover, between 10–25% of the individuals graduating from engineering
colleges cannot be employed in any technology company in India. A similar situation exists with management graduates.
The relative ease with which educational institutes can be established and the lack of sufficient regulation has hit quality.
Future prospects
Significant competitive advantage in biotechnology research
India offers several advantages that make it a preferred R&D destination for biotechnology research. The country has the
largest number of US Food and Drug Administration-approved manufacturing plants in the world. Over 300 Indian
colleges specialize in bioinformatics and the biological sciences, and produce over 500,000 graduates annually. Around
100 medical colleges add nearly 17,000 medical practitioners annually, and around 300,000 postgraduates and 1,500
PhDs qualify in biosciences and engineering each year. The nation also has proven competence in fermentation-derived
pharmaceuticals, which can be leveraged in biogenerics. In addition, there are excellent genomic research opportunities
due to the presence of diverse plant, animal and microbial life.
Push to urban infrastructure
The Narendra Modi government has an ambitious plan of building 100 smart cities, which will be urban centers with
digital clusters connected via fiber optics, and will provide next generation service to the residents. A budget of around
$1.2 billion is allocated to provide the initial push in order to revitalize the tech startups, along with an intention to
promote China style infrastructure in the country. This push by the government had already attracted attention of
technology giants like Cisco and IBM, who are showing keen interest in forming tie-ups with real estate developers in
order to submit proposals and bid for the projects. The DIPP (Department of Industrial Policy & Promotion) has already
expressed interest in the process of shortlisting technology consultants for the above project.
Future risks
Low proportion of high technology exports
According to the World Bank, India’s high technology exports (as a percentage of manufactured exports) stood at a
dismal 7.5%, way below peers such as China (25.75%), Brazil (12.3%), and Russia (13.7%) as of 2015.

PESTLE Analysis
Figure 18: High-technology exports (% of manufactured exports) - 2015
India
30.00
7.52
25.00
20.00
15.00
South Africa 10.00 Brazil
5.88 5.00 12.31
0.00
13.76
China Russia
25.75
High technology exports are products with high R&D intensity, such as aerospace, computers, pharmaceuticals, scientific
instruments, and electrical machinery. High-end technological innovation would make India’s exports less vulnerable to
price competition. Exporting low and medium technology products poses significant risks to the economy, as such export
is likely to suffer from high competition and price pressures.

PESTLE Analysis
Legal analysis
Overview
A comprehensive legal and regulatory framework has made it possible for business entities in India to prosper. Recent
tax reforms, such as the implementation of VAT, have been successful and have augmented indirect tax collections in
the country. The finance ministry has proposed the implementation of the Direct Tax Code (DTC), which aims to widen
tax slabs and invalidate the numerous tax exemptions that are currently in place.
In a move toward abolishing the multiple layers of taxation that currently exist for consumption of goods and services in
India, the parliament passed the Goods and Service tax (GST) bill in 2016. The GST is expected to be effective from
2017–18 financial year and will replace all indirect taxes which are levied by the central and state governments on goods
and services. The bill is considered to be one of the biggest reform in India since the opening up of the economy in the
early nineties.
The country has long faced the problem of loose corporate governance with a number of high profile incidents witnessed
in recent times. The adoption of the new Company Law in 2013 is expected to improve the accountability of corporates
by strengthening the redress mechanism for minority shareholders, increasing accountability of auditors, providing easier
norms for mergers and acquisitions, implementing stricter anti-fraud measures and requiring corporates to adhere to new
corporate social responsibility (CSR) requirements. However, the patchy enforcement of regulations will remain a barrier
to the country’s progress without greater awareness and a coordinated approach from its enforcement regimes.
Judicial delays continue to cause problems, with a staggering number of unresolved cases piling up in the courts;
however, the judiciary is considered fair and competent. Weak IPR laws have resulted in soaring piracy rates across
entertainment, business software and books. Restrictive trade and foreign investment regulations are restraining India
from gaining the advantages of assimilation with the global economy.
Table 9: Analysis of the Indian legal landscape

▪ Comprehensive legal framework for business entities ▪ Barriers to trade and investment
▪ Weak implementation of intellectual property laws
▪ Judicial delays
▪ Improvement in corporate governance ▪ Inefficient implementation of regulations
▪ Tax reforms ▪ Lack of a single financial market regulator
Current strengths
Comprehensive legal framework for business entities
Legal and regulatory aspects are crucial to creating a successful business environment in any country. They reflect the
policy framework and the mindset of the governmental structure of that country, and ensure that every company is
functioning according to the statutory framework.
The regulatory regime in India has comprehensive laws that have been amended from time to time. Some of the

PESTLE Analysis
important laws regulating business in the country are the Companies Act, the Patents Act, the Copyrights Act, the
Trademarks Act, the Special Economic Zones Act, the Labor Laws, the Right to Information Act, the Information
Technology Act, the Environment Protection Act and the Foreign Exchange Management Act.
Some of the regulatory bodies in India are the SEBI, the RBI, the Registrar of Companies, the Director General of
Foreign Trade, the Insurance Regulatory and Development Authority and the Telecom Regulatory Authority of India.
While the country has a sound legal framework for business entities—which has driven business growth—laws and
regulations are still not implemented properly. By and large, the legal system provides a fair, equitable, and transparent
framework for both employers and employees.
Current challenges
Barriers to trade and investment
Despite significantly liberalizing trade over the last two decades, the tariffs imposed on some classes of imports are very
high. In addition to standard tariff rates, importers are also required to pay a countervailing duty, a form of VAT on
imported products. Moreover, the import tariff imposed by India is much higher than some other emerging markets. In
addition to high duties, the high bound tariff rate, which is the maximum tariff rate agreed by the country under
negotiations with the World Trade Organization (WTO), adds to the uncertainty regarding the future duties for producers
and investors. In some cases, in order to ensure domestic supply, there also exist taxes or restrictions on exports, which
creates price distortions in international markets. According to the World Bank, the total taxes on international trade as
percentage of revenue was the highest for India as compared to other BRICS nations. The higher taxes like export and
import duties, exchange profits and taxes etc. discourage traders to trade across borders. To reap increased benefits
from global trade, India needs to continue its customs duty reforms and work on the creation of a more consistent
environment for its trade. In 2014, the Modi government scuttled the World Trade Organization trade facilitation deal in
mid-2014, which would have smoothened trade across ports and borders, creating a negative sentiment contrary to the
growth friendly policies of the government.
Like trade, foreign direct investment (FDI) in India is also relatively restrictive in many sectors. In order to achieve its
potential as an attractive FDI destination, India needs to speed up reforms in opening up the designated sectors to
foreign investment. Though India is more open to FDI than China, the barriers to FDI in India are much higher than those
of the other OECD countries.

PESTLE Analysis
Figure 19: Taxes on international trade
14.00 12.97 13.21

Taxes on international trade (% of
12.00
10.00
revenue)
8.00
6.00
4.00 3.47
2.64 2.84
2.00
0.00
Brazil China South Africa Russia India
Note: Figures for India and Russia corresponds to 2013 and 2015
respectively. Rest of the figures corresponds to 2014
Weak implementation of intellectual property laws
The Agreement on Trade-Related Aspects of Intellectual Property Rights was introduced in India in 1995 and sets out
the basic requirements for the protection and enforcement of intellectual property rights (IPR). India is also a signatory of
the 1883 Paris Convention for the Protection of Intellectual Property and the 1928 Berne Convention on copyright.
However, Indian copyright law has a range of loopholes that can be easily exploited. For example, copyright protected
works can be used freely in educational and religious institutions, in journalism, public libraries, and many other areas.
India also has many problems when it comes to enforcing existing IPR laws; in essence, IPR protection in India is almost
completely ineffective, as many of the laws governing IPR protection are simply not enforced. The weak implementation
of the intellectual property laws has hindered development of intellectual property. Consequently, the country pays a lot
for the use of foreign intellectual properties, according to the World Bank.

PESTLE Analysis
Figure 20: Charges for the use of intellectual property
6000
5000
4000
USD million
3000
2000
1000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Charges for the use of intellectual property, payments (BoP, current USD
million)
Charges for the use of intellectual property, receipts (BoP, current USD million)
w
This lack of enforcement has resulted in soaring piracy rates across entertainment, business software, books and the
Internet and little effort has been made to stop this. Although piracy rates have come down marginally—by a few
percentage points—levels are still very high in the country. Laws remain ineffective and law enforcement in the sector is
almost non-existent. The cumbersome and time-consuming judicial system has low conviction rates, and the equally
slow civil system rarely awards damages.
The Information Technology Act of 2000 was introduced to help improve the situation in India. However, while this piece
of legislation defines "data" it avoids addressing the issue of data protection. A special appellate court was created by the
act, with the function of investigating violations; but due to the sluggish pace of the Indian courts, cases drag on without
any resolution.
Judicial delays
Delays in the Indian judicial system have been a serious problem, and have become a subject of debate in recent times.
In the era of economic liberalization, the first major fraud was the Harshad Mehta scam. The court took many years to
deliver its verdict. By contrast, at around the same time in the early 1990s, there was a similar scandal in Singapore
involving Nick Leeson of Barings Bank. Leeson was convicted within two years.
The Indian legal system measures up reasonably well in fairness and independence but falls short in speed and
efficiency. These attributes are vital to the health and credibility of any justice system and to any liberal democratic order.
A major cause of these delays is understaffing: India has fewer than 13 judges per million people, a figure that compares
poorly with countries such as Canada (around 75 per million) and the US (104 per million). Delays in the system are
common, and an average case can take several years to be resolved. Around 25.4% of the cases in the Indian judicial
system have been pending for more than five years, according to a 2013 report by the Supreme Court-supported
National Court Management System (NCMS). As a result, pending cases are piling up at the level of the subordinate
judiciary. Legal experts estimate that it would take around 300 years to clear the backlog of around 30.0 million cases.

PESTLE Analysis
India desperately needs to overhaul its entire legal system, paying special attention to tackling this backlog. Alternative
dispute resolution mechanisms and the filling of vacant judge positions have been stressed as measures to deal with the
huge number of pending cases.
Future prospects
Improvement in corporate governance
The issue of corporate governance is important for developing countries like India, since it is central to economic and
financial development. Corporate governance entered the international limelight with the collapse of high profile
companies such as Enron and WorldCom. Similarly, scandals such as the 2009 Satyam fraud led to the need for a new
bill to address corporate governance issues in India. To this effect, the Indian parliament passed the Companies Bill in
2013, which was enacted into law following President Pranab Mukherjee’s approval in late August 2013. The new law,
which replaces a 57-year old legislation on corporate governance, has been in effect since April 2014.
The new Companies Law envisages strengthening the redress mechanism for minority shareholders, increased
accountability of auditors, easier norms for mergers and acquisitions, stricter anti-fraud measures, new corporate social
responsibility (CSR) requirements for corporates and a more friendly business environment. The law empowers minority
shareholders by granting them the right to file class action lawsuits against the management, consultants or auditors of
companies. Apart from strengthening investor protection, the law has also laid new requirements regarding “independent
directors”, which comprises members who do not have a financial stake in the company and their monetary transactions
with the company (not exceeding 10% of its revenue). The law requires at least one-third of the directors to be
independent. The law also addresses the issue of gender equality by mandating one woman as a director on the
company board in a certain class of companies.
In order to make the M&A procedure within India easier, the new law allows a holding company to merge with a
subsidiary with just the union government’s permission without having to go through the costly and time-consuming route
of courts and tribunals. It also makes M&A at the international level easier by eliminating legal hurdles, as domestic
companies can now merge with or acquire companies abroad by setting up overseas listing vehicles. The new law lays
special provisions for Corporate Social Responsibility (CSR). In order to tackle corporate fraud, the government has
empowered its investigative arm—the Serious Fraud Investigation Office (SFIO)—and has made provisions to protect
whistleblowers.
In effect, the new law is expected to improve the business climate in India by improving the transparency and
accountability of corporates and by protecting investors’ rights.
Tax reforms
A sound tax system with moderate rates and a broad base is an integral part of prudent fiscal policy. In line with the
government’s declared policy of broadening the tax base, the scope and coverage of services that fall under the service
tax has been widened, by adding more services and expanding the scope of some of the existing services.
The Direct Tax Code bill is a combination of tax relaxation and the abolition of most tax-exemptions. The code is
expected to not only improve tax compliance by lowering the income tax rate, but also enable more tax revenues for the
government by discouraging tax evasion. The tax code will broaden the tax base significantly, lowering the tax burden in
general.
In a move toward abolishing the multiple layers of taxation that currently exist for consumption of goods and services in
India, the parliament passed the Goods and Service tax (GST) bill in 2016. The GST is expected to be effective from
2017–18 financial year and will replace all indirect taxes which are levied by the central and state governments on goods

PESTLE Analysis
and services. The bill is considered to be one of the biggest reform in India since the opening up of the economy in early
nineties.
Future risks
Inefficient implementation of regulations
The enforcement of regulations has been and will continue to be a challenge for the country because of the loopholes
available to evaders. Be it corporate governance or any other specific law, enforcement remains weak. As a result of
loose governance, several high profile incidents of fraud like the Harshad Mehta scam, the Ketan Parikh scam, the UTI
scam, Satyam scam and the most recent NSEL scam are some of the biggest instances of corporate fraud in the
country. There is no guarantee that similar cases can be avoided in the future.
The financial system in India, as in many other countries, consists of specialized and non-specialized financial
institutions, as well as organized and unorganized financial markets, and financial instruments and services. Procedures
and practices have been laid down for the markets, but the major issue of compliance persists. The financial market is
subject to manipulation, as certain players may have access to asymmetric information, and despite the existence of
regulations and regulators, financial fraud continues to occur. There is a desperate need for the committed
implementation of corporate governance.
Lack of a single financial market regulator
Multiple regulatory systems exist in India, which makes it difficult for market participants in the financial sector. In
contrast, many developed countries have a single regulator. Norway was the first country to set up an integrated
regulatory agency in 1986, followed by East Asian countries such as Japan and South Korea in the 1990s. India has
many regulators—the RBI, the SEBI, the Forward Markets Commission, and the Insurance Regulatory and Development
Authority—to supervise financial markets. These regulators have an obvious overlap of functions.
In India, several industry experts have voiced concerns over the lack of a single regulator. A system operated by a single
financial regulator is superior as it reflects the nature of modern financial markets, where distinctions between different
sectors and products have been broken down. It is also believed that a single regulator will be more efficient in allocating
resources, as it will oversee the entire financial industry and therefore be in a position to devote regulatory resources
wherever they are most needed on a case-by-case basis. Other factors that are expected to drive the idea of a single
regulator are the benefits of economies of scale, the advantages of information sharing, and clear accountability.

PESTLE Analysis
Environmental analysis
Overview
India’s growing population has placed an excessive burden on natural resources such as water, forests, sand, rocks and
minerals, and the environment. Rapid urbanization and industrialization has aggravated the problems of pollution and
proper sanitation, posing a serious threat to biodiversity. An excessive reliance on fossil fuels for the increasing energy
demands of the nation's huge population has increased India’s share of global greenhouse emissions. In fact, the air in
most of the cities in India is dangerously polluted.
Although India is home to rich biodiversity and has a strong environmental policy framework in place, the desired results
are yet to be achieved at ground level. Corruption and influential political groups at the local level, and an extremely slow
legal system, contribute to environmental offences often being ignored.
Table 10: Analysis of Indian environmental landscape

▪ Rich biodiversity ▪ Depleted water resources
▪ Comprehensive environmental policy framework ▪ Dependence on fossil fuels for energy requirements

▪ Public-private partnership and ecotourism ▪ Distortionary policies
▪ Cleaning river Ganga ▪ Enforcement deterrents
▪ Afforestation fund
Current strengths
Rich biodiversity
India is the seventh largest country in the world and Asia's second largest nation, with an area of 3,287,263 sq. km.
Despite having only 2.5% of the world's land area, India accounts for 7–8% of globally recorded species. The country is
among the 12 mega biodiversity regions of the world, which are believed to be home to 60–70% of global biodiversity.
India has nearly 2,400 known species of amphibians, birds, mammals, and reptiles, of which 18.4% are widespread. Of
these, 10.8% are threatened. The country is home to nearly 19,000 species of vascular plants, of which 26.8% are
endemic. There are a multitude of benefits of biodiversity including medicines, industrial materials, and the provision of
ecological services.
The Biological Diversity Act, 2002 aims to govern conservation and access to the sustainable use of biological resources,
and provides power to the National Biodiversity Authority. The Council of Scientific and Industrial Research in India has
earmarked a Traditional Knowledge Digital Library (TKDL), which is a computerized library of Indian systems of
medicine. By September 2013, an estimated 290,998 formulations of Ayurveda, Unani, Siddhi, and Yoga had been
documented in the TKDL. The US Patent and Trademark Office and the European Patent Office grants nearly 2,000
patents related to Indian medicine systems annually.

PESTLE Analysis
Comprehensive environmental policy framework
India has created a broad environmental framework of laws and institutions at both the national and state level. The
central government and the country's citizens have been given the responsibility for ensuring the protection and
improvement of the environment in the Constitution of India, through Articles 48(a) and 51(a) (g). The provision of the
right to live in an environment free of pollution is included under Article 21. Over time, improvements to the institutional
capacity of regulatory agencies such as the Central Pollution Control Board (CPCB) and the State Pollution Control
Board (SPCB) have been witnessed; in addition, India has taken several proactive regulatory measures for the protection
of biodiversity.
Apart from the Biological Diversity Act (2002), India has taken significant regulatory steps to protect biodiversity.
Management of forests and the conservation of forestland fall within the ambit of the India Forest Act (1927) and the
Forest (Conservation) Act (1980), respectively. The Wildlife (Protection) Act (1972) aims to protect wild animals, birds,
and plants, and intends to protect, propagate, or develop wildlife or its natural environment through national parks and
sanctuaries.
Current challenges
Depleted water resources
India has a river system comprising more than 20 major rivers and several tributaries. Apart from these rivers,
groundwater provides another important source of water. Over the years, the water table in India has declined due to
excessive withdrawal for irrigation, industry and domestic consumption. According to the World Bank, the annual fresh
water withdrawal as percentage of internal resources was one of the highest as compared to other BRICS nations. Of the
total fresh water withdrawal, India used as high as 90.41% of water for agriculture, followed by domestic purpose (7.3%)
and industry (2.2%) in 2014. In 2014, the total fresh water withdrawal was estimated to be at least 761 billion cubic
meters, which is much higher than China which withdraw 607.8 billion cubic meters in the same year.

PESTLE Analysis
Figure 21: Annual freshwater withdrawals and water productivity- 2014
Brazil
100
80 60
60
agriculture (% of total freshwater
40
withdrawal) South Africa China
62.52 64.53
20
domestic (% of total freshwater
withdrawal) 0
industry (% of total freshwater
withdrawal) 19.94
total (% of internal resources)
Russia 90.41 India
35.00 32.24
US$ GDP per cubic meter of total freshwater
Water productivity, total (constant 2010
30.00 27.52
26.59
25.00
withdrawal)
20.00
15.00 13.71
10.00
5.00 2.80
0.00
India China South Africa Russian Brazil
Federation
In addition, with severely degraded catchment areas, the extent to which groundwater can be recharged is diminished.
The natural drainage and water flow of many important rivers have been altered due to the withdrawal of water and the
construction of large dams. Rivers in India face dangerous levels of water pollution caused by waste and effluents
discharged by both households and industries, making it further unfit for consumption. Therefore, there is an urgent and
PESTLE Analysis
growing need to address the issue of water resource management in a sustainable manner and stop waste disposal in
water bodies.
Dependence on fossil fuels for energy requirements
The surge in economic activity has further widened the gap between demand and supply of energy. India’s dependence
on coal-based thermal energy has resulted in a host of environmental problems. Coal and oil, the fuels that are most
associated with greenhouse gas emissions, have contributed much of this increased energy consumption. According to
the World Bank, the CO2 intensity, i.e. CO2 emission from the solid fuel mainly from coal, stood at 2.62 (kg of oil
equivalent energy use) in 2013, which is lesser than China and South Africa, but more than Brazil and Russia.
Figure 22: CO2 intensity
3.63
3.55 3.57
3.50
CO2 intensity (kg per kg of oil equivalent
3.50 3.38 3.34 3.33 3.36 3.34 3.39
3.00
energy use)
2.68
2.63 2.62
2.58
2.43 2.48 2.45 2.48
2.50 2.45
2.43
2.00
1.67 1.72
1.58 1.63
1.53
1.50
2009 2010 2011 2012 2013
Brazil Russia India South Africa China
Coal is the dominant fuel in India's energy mix, accounting more than half of total electricity generation. This demand is
driven by fuel for thermal power plants, steel, and cement factories. Considering India's energy resources, coal may
continue to provide a large part of the country's energy requirements in the future. However, coal is the most polluting
fuel in terms of greenhouse gas emissions. Therefore, efficient measures for generation, transmission, and the end-use
of electricity need to be swiftly implemented to reduce environmental pollution in the country.
Future prospects
Public-private partnership and ecotourism
The international recognition of environmental concerns and mounting compliance issues have opened up greater
opportunities for public-private partnerships. This will lead to profitable opportunities for the private sector in environment-
related projects. Ecotourism provides another development opportunity in India, despite its potential to cause
environmental degradation. Indeed, a well-designed ecotourism system is a form of small-scale industry that can
conserve local ecosystems and help preserve indigenous culture and knowledge systems in rural areas. It can alleviate
PESTLE Analysis
migration to urban areas by offering gainful employment to individuals who wish to work near their villages.
Cleaning river Ganga
The Modi government has announced a campaign for cleaning the Ganga, an important river in India. The river has been
highly polluted through dumping of industrial waste and sewerage over the years. The government has allocated
INR20.37 billion ($299.6 million) for the project. It also includes development of famous Ghats and beautification of the
banks. The clean-up of the river Ganga has been one of the major aspects of the drive by the Modi government to clean
up the environment.
Afforestation fund
Since October 2015, the Central government had started taking steps to unlock the INR400 billion ($5.8 billion) fund,
which is currently lying idle in Compensatory Afforestation Fund Management and Planning Authority (CAMPA). These
funds have been kept unutilized since 2009. The country’s Supreme Court has already ordered that the funds should be
accessed by the Central and State governments. Afforestation is an integral part of India’s Intended Nationally
Determined Contributions (INDCs).
Future risks
Distortionary policies
Energy prices are highly distorted in India to different degrees. Various kinds of subsidies put a veil on the negative
externalities of the fossil fuels and do not reveal their true scarcity value, resulting in high utilization of these energies and
ultimately contributing to pollution. Price of scarce energy resources should take into account their environmental and
social cost, and putting a tax on it is an effective way to curb wastage of precious natural resources. Moreover, the
distortive pricing mechanism is also inhibiting development of green technologies and entrepreneurship.
Enforcement deterrents
Although environmental laws and regulations in India are comprehensive, the enforcement and prosecution of violations
remains sporadic. The State Pollution Control Board (SPCB) has the legal authority to direct a polluting industry to shut
down, but this power is rarely used. The closure of a facility is associated with a loss of jobs to the community, and
therefore is viewed as a last resort.

Political Landscape
POLITICAL LANDSCAPE
Summary
The general elections in April and May 2014 saw the emphatic victory of the center-right Bharatiya Janata Party. Before
the elections, most opinion polls suggested victory of the BJP; however, the massive victory surpassed the projections of
most optimistic opinion polls. The Modi government came to power on the promise of growth and reforms.
Evolution
Pre-1950s
India is an ancient civilization, which was ruled by various dynasties. The modern history of India is dominated by British
rule, which extended for almost two centuries from 1757 to 1947. This period was very influential in the formation of the
country. The British entered India as merchants and slowly gained control over all the kingdoms. The British victory in
1757 at Plassey signaled the start of British occupation. The 1857 revolution was the Indian people's first attempt at
fighting for freedom, but it was not until almost a century later, on August 15, 1947, that the nation was granted
independence. The Quit India movement championed by Mahatma Gandhi proved to be one of the most influential
movements leading to India's independence.
It is fair to say that the institutional road to independence was laid down by the Government of India Act of 1935, where
the gradual emergence of India as a self-governing entity had first been partly envisioned. Following India's
independence in 1947, Jawaharlal Nehru became the country’s first prime minister and the Constituent Assembly
deliberated over the precise constitutional future of India.
1950–90
On January 26, 1950, India became a republic, and the Constitution of India was promulgated. The Indian National
Congress (INC) had long been the principal political party in India, providing leadership to the freedom movement, and
under Nehru’s stewardship, it remained the largest and most influential party for the next three decades. His regime was
marked by the advent of five-year plans, which brought science and major industry to India. In Nehru's own words, "steel
mills and dams were to be the temples of modern India". However, relations with Pakistan remained patchy, and the
purported friendship of India and China proved to be something of a myth. China’s invasion of India in 1962 is said to
have dealt a mortal blow to Nehru. Nehru’s tenure was followed by those of Lal Bahadur Shastri, Gulzarilal Nanda and
Indira Gandhi. Shastri’s regime saw tremendous support for soldiers and farmers. India experienced a victorious war
against Pakistan in 1971, a state of emergency during 1975–77 and the assassination of Indira Gandhi in 1984. Her son,
Rajiv Gandhi, succeeded her as the country’s prime minister until 1989, when India moved into an era of coalition
governments when the Janata Party and the BJP formed a government.

Political Landscape
The figure below offers a snapshot of India’s political evolution since independence.
Figure 23: India – key political events since independence
1947–60 1961–75 1976–90 1990–2003 2004 Onwards
• Independence on Aug • Second India-Pakistan • Emergency continued • India faced an • Congress (I) emerged
15, 1947. War in 1963. until 1977, when Indira economic crisis and was as single largest party in
Gandhi surprisingly left with foreign exchange 2004 elections.
• First India-Pakistan • India-China war in
declared elections. for only three weeks of
war immediately after 1964. • Dr. Manmohan Singh
imports.
independence. • Jana Sangh won was elected as the prime
• Pt. Jawaharlal Nehru
strong majority in the • Congress government minister of UPA in 2004.
• New constitution came died in 1964.
elections and Chaudhuri under prime minister P.V.
into force in 1950. • Congress-led UPA won
• Indira Gandhi became Charan Singh became Narsimha Rao liberalized
the May 2009 general
• Pt. Jawaharlal Nehru the dominant face of the first non-Congress the economy.
elections and Dr. Singh
became India’s first Congress Party and the prime minister.
• Rajiv Gandhi was became prime minister
prime minister. country’s first lady prime
• Growing demand for assassinated in 1991. for a second consecutive
minister.
• Government followed separate Sikh statehood, term.
• Era of coalition politics
combination of capitalist • Green Revolution actively supported by
began with re- • Ex-finance minister
and socialist model and started with very good Pakistan.
emergence of Pranab Mukherjee was
focused on results. India became
• Operation blue-star Communists and strong elected as the13th
industrialization along self-sufficient in food-
executed in the holy Sikh local players. president of India in July
with removal of social grain production.
Shrine, the seat of Sikh 2012.
disparities. • Demolition of Babri
• Emergency imposed in religion, to crush Sikh
Masjid led to wide- • In May 2014, the Hindu
• Government adopted a 1975. extremism.
spread riots. nationalist Bharatiya
policy of the Panchsheel
• A constructive • In October 1984, Indira Janata Party and its
for relationships with • BJP won majority in
opposition emerged in Gandhi was prime ministerial
neighbors. 1996 general elections
the form of Bhartiya Jan assassinated and her candidate, Narendra
due to its strong
Sangh, the predecessor son Rajiv Gandhi Modi, emerged victorious
communal actions
to present day BJP. assumed power. in the general elections.
(Hindutva).
1991–2003
In 1991, with P.V. Narasimha Rao as prime minister, the government implemented economic reforms to liberalize the
economy and various sectors were opened up to foreign participation. However, the years 1991 to 1993 were also
marked by the assassination of a former prime minister and large-scale communal riots across the country. In 1991, a
suicide bomber assassinated Rajiv Gandhi. In 1992, the demolition of a mosque in the city of Ayodhya triggered
communal riots that killed around 900 people. This was followed by a retaliatory attack by the underworld in the city of
Mumbai, which resulted in around 250 fatalities.
In 1996, the INC suffered a defeat at the hands of BJP; however, the BJP did not have enough seats to secure a
parliamentary majority. As a result, India moved into an era of coalition governments. During 1996–98, India had two
coalition governments with the INC providing outside support to the government, first led by H.D. Deve Gowda and then
by I.K. Gujral. In 1998, the INC decided to withdraw from the government after an investigative panel linked Tamil Nadu’s
Dravida Munnetra Kazhagam (DMK) to the Sri Lankan militants responsible for Rajiv Gandhi’s assassination. Elections
were called and although, like in 1996, no party was able to attain an absolute majority, the BJP formed a government
under Atal Bihari Vajpayee with support from 286 out of 545 Lok Sabha members. In 1999, another Tamil Nadu regional
party, All India Anna Dravida Munnetra Kazhagam (AIADMK), pulled out from the coalition and elections were called for
the second time in 18 months. The BJP, for the third time in four years, emerged as the leading party and formed a

Political Landscape
coalition with 20 alliance partners, known as the National Democratic Alliance (NDA). The coalition successfully
completed its full five-year time under the leadership of Prime Minister Atal Bihari Vajpayee.
2004–2016
In the 2004 elections, the INC regained power with its allies under the banner of the United Progressive Alliance (UPA),
and Dr. Manmohan Singh became prime minister. The UPA government focused on international trade and integration.
The areas of priority were agriculture, education, infrastructure, urban renewal, water and employment. Foreign policies
focused on developing trade relations.
The general elections in April and May 2009 saw the unexpected victory of the INC party. Dr. Singh, an Oxford-educated
economist, is the only individual to have been re-elected following a full term since the time of the first prime minister.
The Singh government was expected to accelerate the pace of reforms after its reelection. However, in 2010, India’s
corruption issues came to the fore with high-level investigations and arrests due to irregularities concerning the
Commonwealth Games and the 2G spectrum awards. The Commonwealth Games scandal involved gross negligence of
officials overseeing the organization of games and alleged misappropriation of funds, while the 2G scandal related to the
sale of broadband licenses for far below market prices, estimated by the CAG to have cost the government INR1.76
trillion ($25.8 billion). These allegations and scams have tarnished the image of the government, and have led to
nationwide protests. In the mid 2014 general elections, under Mr. Narendra Modi’s leadership, the BJP witnessed a
massive electoral victory and formed government. In 2015, BJP lost one sided elections in New Delhi from newly formed
Aam Admi Party (AAP) led by Arvind Kejriwal.

Political Landscape
Structure and policies
Key political figures
The key political figures in India are:
 President Pranab Mukherjee
 Prime Minister Narendra Modi.
Figure 24: India – key political figures
Pranab Mukherjee is the 13th and current president of India. Mukherjee was a senior leader of the Indian
National Congress and occupied several ministerial portfolios in the government of India. Prior to his election as
president in July, he was union Finance Minister.
Narendra Modi is the 15th prime minister of India to occupy the chair. He is presently the leader of the ruling
Bhartiya Jananta Party (BJP) and member of parliament. He has previously served as the chief minister of
Gujarat. Modi is a Hindu nationalist and a member of the Rashtriya Swayamsevak Sangh (RSS). He is a
controversial figure internationally and within India as his government has been criticized for failing to act to
check the 2002 Gujarat riots. Nevertheless, he is praised a lot for his growth-friendly economic policies.
Structure of government
The president is the constitutional head of the federal government. Real executive power is vested in a council of
ministers, with the prime minister as head.
Central/federal
India has three branches of governance: the legislature, the executive, and the judiciary. The legislature of India is the
bicameral parliament, which consists of the upper house, known as the Rajya Sabha (Council of States), and the lower
house, known as the Lok Sabha (House of the People). The executive branch consists of the president, the vice-
president and the council of ministers (the cabinet being its executive committee), headed by the prime minister. India
has a three-tier judiciary, consisting of the Supreme Court (headed by the chief justice of India), 21 high courts and a
large number of trial courts.
The Rajya Sabha meets in continuous session and, unlike the Lok Sabha, is not subject to dissolution. The two houses
share legislative powers, except in the area of passing regulatory bills, where the Lok Sabha has overriding powers.
Political Landscape
Key political parties
Ever since its formation in 1885, the INC has been the dominant political party in India. The party originally espoused
moderate socialism and a planned, mixed economy, although it now supports deregulation, privatization and foreign
investment. While the INC has historically dominated Indian politics, the family of Jawaharlal Nehru, India’s first prime
minister, who served for 17 years, has dominated the leadership of the party. Subsequently, his daughter Indira Gandhi
became prime minister; after her assassination on October 31, 1984, her son Rajiv Gandhi became the prime minister.
Mrs. Sonia Gandhi, Rajiv Gandhi’s widow, is the current INC president. The party emerged as the single largest party in
the 2004 general elections and formed a coalition government called the UPA, along with 16 other parties. The INC-led
coalition won a surprise victory at the general elections in April and May 2009, coming within 10 seats of winning an
absolute majority in parliament. However, owing to high inflation, corruption scams and slow growth, the popularity of the
INC fell and it lost by a big margin in the 2014 elections.
The other major political party in India is the BJP. Established in 1980, it is positioned as a champion of the socio-cultural
values of the country's Hindu majority, and advocates conservative social policies and strong national sentiment. It led
the government from 1998 to 2004. The BJP is the leading party in the political coalition called the National Democratic
Alliance (NDA). When it was originally founded in 1998, there were 13 parties in the coalition, but currently there are
eight. In the 2004 elections, the NDA won just 186 seats, of which the BJP won 138. The BJP was expected to do well in
the April and May 2009 elections, but its share of the vote declined further to just 116 seats. However, on a pro-growth
agenda the BJP won 282 seats out of 545 seats and formed a government under Prime Minister Narendra Modi.
Other parties
• Trinamool Congress
• Dravida Munetra Kazhakam (DMK)
• Samajwadi Party (SP)
• Rashtriya Janata Dal
• Janata Dal (United)
• Bahujan Samaj Party (BSP)
• All India Dravida Munnetra Kazhagam
• Biju Janata Dal (BJD)
• Nationalist Congress Party (NCP)
• Communist Party of India (Marxist)
• Aam Aadmi Party (AAP)
Composition of legislature
In the general elections in April and May 2014, the BJP won 282 seats and formed the government with Mr. Narendra
Modi as the prime minister. The Indian National Congress secured 44 seats in the elections.

Political Landscape
Figure 25: Composition of Indian parliament after April–May 2014 elections
Independents, 3
seats
Others, 143
seats
Bharatiya
Janata Party,
AITC, 34 seats 282 seats
AIADMK, 37
seats Indian National
Congress , 44
seats
Key policies
Economic
The new government is expected to accelerate key reforms such as quick sanctions to pending projects, reducing
subsidies and passing market liberalizing reforms. Since coming to power, the Modi government has raised the threshold
for foreign investors in sectors such as defense and insurance, although more was expected from him. Moreover, the
government also increased railway fares, which is a laudable move. The surge in Indian stock markets since Modi’s
coming to power signals the market’s faith in Modi’s strong commitment to bring in economic reforms to revive growth,
though it has been fading recently, as earnings growth is still not keeping pace with the market expectations. In spite of
all this, the Indian growth story still remains intact. Overall, more reforms are expected in the medium term in spite of
certain constraints. Nevertheless, on the whole, the regulatory and economic environment is expected to be more
business friendly as the new government has promised to cut “red tape”. Apart from many economic policies, the BJP
government passed goods and service (GST) bill in parliament in 2016. The GST is considered to be the biggest reform
in the indirect tax structure since the opening up of the economy in early nineties. Secondly, on 8th November 2016, the
Reserve Bank of India (RBI) and the government demonetized INR500 and INR1,000 notes. The 500 and 1000
denomination notes constitutes approximately 86% of Indian hard currency according to various sources. The sudden
shock may slow the economic growth in short run.
Social
India’s main social welfare programs have included the National Common Minimum Program, the National Employment
Guarantee Scheme and the National Food for Work Program. The government is taking steps to improve access to
affordable healthcare and medicines. A National Rural Health Mission has been launched to improve access to
healthcare for the weaker sections of rural society. The Universal Health Insurance Scheme for poor families has also
been launched, as has a Senior Citizens Savings Scheme. Additionally, new centers of excellence in medical research
Political Landscape
and advanced healthcare are due to be set up.
The parliament also passed the National Food Security Bill in 2013, which will provide grain to 67% of the Indian
population at subsidized prices. To protect the poor from inflation, wages in the Mahatma Gandhi National Rural
Employment Guarantee Scheme have been indexed to consumer price inflation since 2011. The scheme has
guaranteed rural employment, besides helping develop social infrastructure. These measures increasingly reflect the
government’s focus on the overall development of society.
In August 2014, the government launched Pradhan Mantri Jan Dhan Yojna (PMJDY) as a part of financial inclusion
program which targets to open bank accounts for the people. In October 2014, the government launched Swachh Bharat
Abhiyan (SBA), a national campaign for hygiene and cleanliness promotion in the country.
Foreign
The new government has given high priority to developing friendly ties with India’s South Asian neighbors, with the aim of
strengthening the South Asian Association for Regional Cooperation (SAARC), and with a particular focus on projects in
ecological conservation, power, and water resources. Nevertheless, India’s ties with Pakistan remain frosty after a series
of border skirmishes between the two armies in 2014 and 2015.
The government aims to improve its ties with East Asian countries, with a focus on supporting trade and investment links
with China and holding further talks to resolve the border issue. Under Modi, the government has also reached out to
Japan for building both diplomatic and economic ties. Nevertheless, India’s relationship with its strategic rival China has
been patchy. The major causes of bilateral friction between the two nations are China’s military and economic support of
Pakistan, and the unresolved border dispute. Despite these concerns, bilateral trade and economic interdependence has
increased over the years, much more pronounced by the recent visit of Mr.Modi to China. The government has also
stated its intention to improve relations with Japan and South East Asian countries.
In 2015, India signed a deal with Japan to build its first bullet train project connecting Mumbai and Ahmedabad, which is
expected to get a funding of around $8 billion from Japan. In addition, the two countries also signed a nuclear deal in
November 2016, to sell civil nuclear power equipment and technology to India. In 2016, India and the US signed the
Logistics Exchange Memorandum of Agreement (LEMOA) which will enhance the military cooperation between the two
nations. The agreement will allow two countries to use their airport bases for the purpose of repair and the replenishment
of supplies.
Performance
Governance indicators
The World Bank's Worldwide Governance Indicators covered 215 countries and territories over 1996–2015, analyzing
nations in terms of six dimensions of governance, namely voice and accountability, political stability and absence of
violence, government effectiveness, regulatory quality, rule of law, and control of corruption. Daniel Kaufmann of the
Brookings Institution, Massimo Mastruzzi of the World Bank Institute, and Aart Kraay of the World Bank Development
Economics Research Group carried out the study. For any country, a percentile rank of zero corresponds to the lowest
possible score, and a percentile rank of 100 corresponds to the highest possible score.
India was in the 60.59 percentile in the voice and accountability parameter in 2015. Voice and accountability measures
the extent to which a country's citizens are able to participate in selecting their government, as well as freedom of
expression, freedom of association, and freedom of the media. India ranked high due to its deep-rooted democratic
principles and respect for freedom of expression and the media. In comparison, China scored low percentile rank of 4.93

Political Landscape
in the same year.
On political stability and absence of violence, India was placed in the 16.67 percentile in 2015. Political stability
measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or
violent means, including domestic violence and terrorism. India has a low percentile rank on account of hostile relations
with its neighbors and incidents of terrorism. In comparison, China also had low but a better percentile rank of 27.14.
The country was in the 56.25 percentile on government effectiveness in 2015. Government effectiveness measures the
quality of public services; the quality of the civil service and the degree of its independence from political pressures; the
quality of policy formulation and implementation; and the credibility of the government's commitment to such policies. In
comparison, China ranked in the 68.27 percentile.
India ranked in the 39.9 percentile on regulatory quality in 2015. Regulatory quality measures the ability of the
government to formulate and implement sound policies and regulations that permit and promote private sector
development. A relatively low ranking highlights the tardy implementation of policies and regulations for the private
sector. In comparison, China had a percentile rank of 44.23 in the same year.
India ranked in the 55.77 percentile on rule of law in 2015. Rule of law measures the extent to which agents have
confidence in and abide by the rules of society, and in particular the quality of contract enforcement, the police, and the
courts, as well as the likelihood of crime and violence. In comparison, China had a percentile rank of 43.75.
On control of corruption, India ranked in the 44.23 percentile in 2015. Corruption is perceived to be high in the country,
especially in terms of government procurement in the telecommunications, power and defense sectors. In comparison,
China ranked in the 50 percentile.
Outlook
With the return of the BJP led government and Mr. Modi at its helm, comprehensive economic reform is expected, as the
incumbent government would not be held hostage to coalition politics, unlike the previous government. On the foreign
policy front, Mr. Modi is believed to follow a muscular approach to foreign policy. This was evident after skirmishes in the
border in October 2014 with Pakistan, after which Mr. Modi stated that the Indian army has given Pakistan “befitting
reply” on ceasefire violations. Relations with Pakistan and China are far from stable. India faces the prospect of violent
attacks from across the border, such as the 2008 Mumbai terrorist attacks. In 2016, India claimed that it had carried out
surgical strikes on militants in the disputed Kashmir territory with Pakistan. Although Pakistan denied any such incident,
but tensions remain high in the Kashmir valley. Relations with China are patchy, as the border between the two countries
is not completely demarcated, and the Indian media carries regular reports of incursions by the Chinese army. Chinese
government, though, on the other hand, have assured Indian counterparts that they will partner in the infrastructural push
to counter the bottle necks of the Indian economy. Internal security threats from extremist religious groups, caste-based
organizations, and Naxalites all pose serious challenges to the political landscape. Nevertheless, the government is
trying to build better relations with its smaller immediate neighbors, Japan and with the West as reflected by the Indian
prime minister’s efforts so far. Overall, India’s political prospects look brighter with a stable government at the center
taking a pro-active approach towards building diplomatic relations.

Economic Landscape
ECONOMIC LANDSCAPE
Summary
Since achieving independence, India has largely followed a quasi-socialist path, characterized by strict government
control over private sector participation, foreign trade and foreign direct investment (FDI). However, since 1991, India has
gradually opened up its markets through economic reforms and reduced government controls on foreign trade and
investment. The incumbent government has been focusing on pro-growth policies and reforms.
The Indian economy registered strong economic growth that averaged 6.84% during 1992–2011, recovering well from a
balance of payments crisis in 1991. The country has been one of the fastest-growing economies in the world during the
last two decades and surpassed Japan to become the third largest economy on the GDP (purchasing power parity) basis
in 2012. However, weak policymaking, supply-side constraints in the domestic economy and vulnerabilities in the global
economy have caused growth to slow to decade-low levels of 5.61% in 2012 and 6.63% in 2013. The growth registered
in 2014 was 7.24% and further increased to 7.57% 2015. In 2016, the Indian economy is estimated to grow by 7.4%,
according to MarketLine.
However, the extremely poor state of the country's infrastructure, high levels of corruption, the rising cost of capital (due
to inflation) and cumbersome regulatory structures have proven to be major obstacles to India's economic growth. If the
new government is able to address some of the above issues, the inherent strength of the economy can propel India to
double-digit growth.
Evolution
1947–90
India initially based its economy around a combination of capitalist and socialist economic models. On one hand, the
government promoted industrialization, while on the other it maintained strict control over industries. A former USSR
model of five-year plans was also implemented. Each plan focused on the development of key sectors. During 1951–79,
the economy grew at an average rate of 3.1%, the agriculture sector grew by 3.0% annually on an average, while the
average annual industrial sector growth was 4.5%.
The rate of growth of the economy as well as agriculture and industry was better in the 1980s, partly attributed to the
reduction of state control in 1970s, which led to a surge in investment. During this period, the economy grew at an
average rate of 5.5%, with the industrial sector growing at an average annual rate of 6.6% and agriculture expanding at
an average annual rate of 3.6%. This industrial growth was, in a large part, financed by the high savings of the Indian
population. However, by the mid-1980s, additional growth in private savings was difficult because they were already at
elevated levels, which indicate the low rate of return of Indian investments. As a result, during the late 1980s, India relied
heavily on external commercial borrowing. By 1990, India was burdened with mounting debt, poor economic
development, and average long-term indicators, which eventually resulted in the 1991 balance of payments crisis. In
order to obtain new loans, the government had no choice but to agree to further measures of economic liberalization.
The government that came to power in June 1991 reaffirmed this commitment to economic reform.
1991–2015
Since liberalization in 1991, the country has benefited from a positive macroeconomic outlook, such as an impressive
6.84% average annual growth rate during 1992–2011, and a well-regulated and developing capital market; and although
the economic growth has slowed substantially since 2011, the country remains one of the fastest growing emerging

Economic Landscape
economies in the world. During 1991–2015, the share of the services sector in the country’s GDP improved by a big
margin, although less than one-third of the population continues to be employed in the sector. The number of people in
agriculture fell below 50% for the first time in 2012 from more than 60% in 1991, and its share in nation’s GDP has also
declined since liberalization, indicative of urbanization. The country has realized trade and foreign investment
advantages after it opened up its economy. Exports and imports have grown at a fast pace since then.
Figure 26: Historical GDP growth in India, 2005–2015
12.00
10.00
8.00
Growth rate (%)
6.00
4.00
2.00
0.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year

Economic Landscape
Financial system
Overview
Financial sector reforms initiated in the early 1990s have had a positive impact on the functions of the Indian financial
system. The gross national savings rate was around 30% in 2013. However, most savings are still in low earning
deposits, which is a cause for concern. India’s banking sector is still dominated by public sector banks, although their
share has been declining steadily with the emergence of private sector banks such as ICICI Bank and HDFC Bank.
Financial authorities and regulators
RBI
The Reserve Bank of India (RBI), established in 1935, is the country's central bank. The RBI is a regulator for the
financial and banking system; it formulates monetary policy and prescribes exchange control norms. The Banking
Regulation Act, 1949 and the Reserve Bank of India Act, 1934 authorize the RBI to regulate the banking sector in India.
India has commercial banks, co-operative banks and regional rural banks. The commercial banking sector consists of
public sector banks, private banks, and foreign banks. The public sector banks comprise the State Bank of India, its
seven associate banks, and 19 other banks owned by the government, which together account for almost three quarters
of the banking sector. The Indian government has a majority stake in these public sector banks.
India has a two-tier structure of financial institutions–at the national level and at the state level. All Indian financial
institutions comprise term-lending institutions, specialized institutions, and investment institutions. State-level institutions
cover state financial institutions and state industrial development corporations providing project finance, equipment
leasing, corporate loans, short-term loans, and bill discounting facilities to the corporate sector. The government also
holds a majority share in these financial institutions. Non-banking financial institutions provide loans and hire purchase
finance, mostly for retail assets, and are regulated by the RBI.
SEBI
The Securities and Exchange Board of India (SEBI) was established under the Securities and Exchange Board of India
Act, 1992. It is the regulatory authority for capital markets in the country. India has 22 recognized stock exchanges that
operate under government-approved rules, bylaws and regulations. These exchanges constitute an organized market for
securities issued by the central and state governments, public sector companies, and public limited companies. The
Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) are the premier stock exchanges in
India. Under the process of demutualization, these stock exchanges have now been converted into companies in which
brokers have a minority share. In addition to the SEBI Act, the Securities Contracts (Regulation) Act, 1956 and the
Companies Act, 1956 regulate the stock markets.
IRDA
The Insurance Development and Regulatory Authority is the regulatory authority in the insurance sector established
under the Insurance Development and Regulatory Authority Act, 1999.
The state-owned Life Insurance Corporation and General Insurance Corporation and its four subsidiaries have
traditionally dominated the insurance sector. In 1999, the Indian government allowed FDI of up to 26% in the insurance
sector. Since then, a number of joint venture private companies have come into existence in the general insurance

Economic Landscape
sector, and their share of the insurance market is rising. In mid-2014, the government raised the FDI ceiling in the sector
to 49%.
Performance
GDP and growth rate
Overview
More recently, the Indian growth story has seen various ups and downs. The economy witnessed robust average annual
growth of 9.4% during 2005–07. Momentum slowed due to the global financial crisis, and real GDP slipped to 3.89% in
2008; India was one of the few countries to sustain a healthy growth rate during the period, mainly due to strong
domestic consumption and investment. Showing signs of a strong revival in 2009 and 2010, the Indian economy grew at
8.47% and 10.25%, respectively. However, domestic policy paralysis on the part of the government and global economic
uncertainty surrounding the euro crisis caused the growth to slow down to 6.63% in 2011 and again to 5.61% in 2012.
Poor economic growth continued in 2013, when the economy registered a GDP growth of 6.63%, mainly due to the
change in tabulation method for calculating growth statistics by the central bank. However, with the new government
sanctioning a host of major infrastructure projects, apart from focusing on key reforms. India’s growth rate came at 7.24%
in 2014 and increased by 7.57% in 2015. MarketLine forecast suggest that the growth rate will remain above 7% at least
till 2020.

Economic Landscape
Figure 27: GDP and GDP growth rate in India, 2010–20
4.00 12.00
3.50
10.00
3.00
Growth rate (%)

8.00
2.50
$ trilliion
2.00 6.00
1.50
4.00
1.00
2.00
0.50
0.00 0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
GDP Real GDP growth rate

Economic Landscape
GDP composition by sector
Agriculture contributed 17.0% of the country’s GDP in 2015, while industry and services contributed 29.7% and 53.2%,
respectively.
Figure 28: GDP composition by sector in India, 2015
Agriculture, 17.0%
Services, 53.2%
Industry, 29.7%

Economic Landscape
Agriculture
The availability of quality seeds—in addition to increased impetus provided by the government in the form of nutrient-
based subsidies, higher allocations to farmer development schemes, and the easy availability of farmer credit, along with
interest subvention—helped the sector improve considerably. Nevertheless, despite registering record output each year,
the share of the agriculture sector has been declining since liberalization. According MarketLine, agricultural output
registered a growth rate of 4.9% in 2015 and is estimated to increase further to 8.9% in 2016.
Figure 29: India’s agricultural output, 2010–15
25.00 25.00
20.00 20.00
Growth rate (%)

15.00 15.00
INR trillion
10.00 10.00
5.00 5.00
0.00 0.00
2010 2011 2012 2013 2014 2015
Year
Agriculture output Growth rate

Economic Landscape
Industry
According MarketLine, during 2010–15, the average industrial growth was recorded at 14.11%. The total industrial output
is estimated to increase from INR36.5 trillion ($53.7 billion) in 2015 to INR39.7 trillion ($58.41 billion) in 2016.
Figure 30: India’s industrial output, 2010–15
40.00 40.00
35.00 35.00
30.00 30.00
25.00 25.00
INR trillion
Growth rate (%)

20.00 20.00
15.00 15.00
10.00 10.00
5.00 5.00
0.00 0.00
2010 2011 2012 2013 2014 2015
Year
Industry output Growth rate

Economic Landscape
Services
The services sector is considered the key growth engine of the Indian economy, with a massive talent pool of well-
educated, English-speaking individuals. The other key segments are hotels and restaurants; transport, storage, and
communication; financing, insurance, real estate, and business services; and community, social, and personal services.
Services output registered growth of 8.31% in 2015 and is estimated to grow by 12.5% in 2016, according to MarketLine.
Figure 31: India’s services output, 2010–15
70.00 20.00
18.00
60.00
16.00
50.00 14.00
12.00
40.00
INR trillion
Growth rate (%)

10.00
30.00
8.00
20.00 6.00
4.00
10.00
2.00
0.00 0.00
Year
2010 2011 2012 2013 2014 2015
Services output Growth rate

Economic Landscape
Fiscal situation
Fiscal deficit/surplus situation
Elevated levels of fiscal deficit coupled with low economic growth represent a significant risk to India. The gross fiscal
deficit was estimated to be around INR5.3 trillion ($78.98 billion) in 2016–17 as compared to INR5.1 trillion ($75.56
billion) in 2014–15, according to RBI. According to the Controller General of Accounts (CGA), the fiscal deficit was 3.9%
of GDP in 2015–16, which is a significant improvement over that of 4.1% of GDP in the year 2014–15 and 4.7% in 2013–
14. Fiscal consolidation is essential to restore the confidence of foreign investors.
Table 11: Fiscal balance in India

Gross Gross Net Primary
Net fiscal Revenue
fiscal primary primary revenue
Year Deficit (INR
deficit (INR
deficit (INR deficit (INR
deficit (INR
deficit (INR
Billion) Billion)
Billion) Billion) Billion) Billion)
2016–17 5339.04 5166.61 412.34 536.11 3540.15 -1386.55
2015–16 5350.9 5274.82 924.69 1080.04 3415.89 -1010.31
2014–15 5108.17 4953.37 1083.73 1166.27 3656.11 -368.33
Source: Reserve Bank of India MARKETLINE
Current account balance
India’s current account deficit has improved considerably from a high of 4.8% of GDP in 2012 to 1.7% of GDP in 2013,
according to the IMF. Additionally, softened crude oil prices and weakened commodity prices also helped India to narrow
the deficit. Deficit has come down to 1.3% of GDP for 2014 and further declined to 1.25% of GDP in 2015, basically due
to fall in commodity prices world over. The current account deficit is estimated to be around $34.47 billion (1.5% of GDP)
in 2016.
External position
Exports and imports
In 2015, exports grew to $501.61 billion, up from $477.2 billion in 2014. Imports grew to $622.72 billion in 2015
compared to $609.96 billion in 2014. According to the CIA – The World Factbook, as of 2015, India's main export
partners were the US (15.2%), the UAE (11.4%) and Hong Kong (4.6%). India’s main import partners were China
(15.5%), Saudi Arabia (5.4%), the UAE (5.5%), Switzerland (5.3%), and the US (5.2%), in 2015.

Economic Landscape
Figure 32: India’s external trade, 2011–15
Exports Imports
1200.00
1000.00
609.96 622.72
588.66 618.65
800.00 590.59
600.00
$ billion
400.00
440.84 463.04 477.22 501.61

200.00 441.86
0.00
2011 2012 2013 2014 2015
Year
External debt
In absolute terms, according to CIA – The World Factbook, India's total external debt increased from $463.2 billion in
2014 to $480.8 billion in 2015. The current increase is mainly attributed to long-term debt components such as external
commercial borrowings, non-resident Indian deposits, and special drawing rights allocated by the International Monetary
Fund (IMF).
International investment position
Foreign direct and portfolio investments
FDI inflows during 2015 totaled around $44.2 billion, up from $34.5 billion in 2014 as per the United Nations Conference
on Trade and Development's World Investment Report 2016. Political and regulatory delays in opening up vital sectors
could be the reason for investors shying away from India. Overall, FDI in India is allowed in all sectors with the exception
of some sectors such as nuclear energy, lotteries, gambling and betting. The new government has increased the FDI
limits in the defense and the insurance sector in 2014.
Foreign exchange position
India’s foreign exchange reserves, as of 2nd December 2016 reached around $363.8 billion, according to RBI. The
exchange rate was below INR68 per dollar as on December 12th 2016. In terms of various adequacy indicators, India’s
reserves remain comfortable.

Economic Landscape
Table 12: Foreign exchange reserves in India

Foreign Exchange Reserves
Variation over
As on December 2, 2016
End-March 2016 Year
Item
INR
US$ million INR billion US$ million INR billion US$ million
billion
Total Reserves 24,861.0 3,63,874.6 1,073.6 3,698.4 1,445.5 11,775.9
Foreign Currency Assets 23,234.6 3,40,131.4 1,044.0 4,027.5 1,345.9 10,881.5
Gold 1,369.3 19,982.9 35.0 –132.1 197.1 2,439.1
SDRs 98.7 1,443.7 –0.9 –57.8 –169.1 –2,562.5
Reserve Position in the
158.4 2,316.6 –4.5 –139.2 71.6 1,017.8
IMF
Source: Reserve Bank of India MARKETLINE
Credit rating
In September 2014, Standard & Poor's (S&P) revised its outlook on India to stable from negative citing the government’s
strong mandate to implement structural reforms. It also stated the improving external position as the reason for the
revision. In October 2015, S&P has retained BBB-minus rating for both local and foreign currency, with a stable outlook.
In November 2016, the S&P ruled out any revision in the credit rating of the country and affirmed ‘BBB-‘long term and ‘A-
3’ short term rating with stable outlook.
Monetary situation
Overview
The RBI implements India's monetary and credit policy. Its monetary policies are broadly framed with the objective of
maintaining price stability and ensuring adequate flow of credit to productive sectors. Its other functions include
regulation and supervision of financial system, management of foreign exchange reserves, issuance of currency and
acting as a merchant banker to central and state government among others.
Key monetary indicators
Inflation
India’s inflation rate has among been the highest in emerging markets, which is also affecting the country’s economic
recovery and constraining its sovereign rating. Consistently high inflation provides little room for the central bank to cut
interest rate, which keeps key interest rate on the higher side, thus acting as an impediment to growth. According to
MarketLine, in 2015, inflation was high at 5.8%. Inflation averaged 8.8% during 2010–15, which is suggestive of the
structural problems, apart from cyclical factors such as commodity prices, which keeps inflation rate on the higher side.
In 2016, the CPI index is expected to grow by 5.69%.

Economic Landscape
Figure 33: Consumer price index and consumer price index-based inflation in India,
2010–20
250.00 14.00
12.00
200.00
10.00
Percentage (%)
Consumer Price Index
150.00
8.00
6.00
100.00
4.00
50.00
2.00
0.00 0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Years
Consumer price index Inflation
Indian stock markets
The NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange) are the two largest national exchanges.
The BSE is the oldest stock exchange in Asia, and the largest by the number of companies listed. The total capitalization
of the 5,788 companies it lists stood at around $1.7 trillion at the end of October 2016, according to BSE. The Sensex
(also known as the BSE 30 Index) is a value-weighted index with a basket of 30 constituent stocks representing a
sample of large, liquid, and representative companies from various sectors.
Outlook
India’s economic growth story was marred by high inflation and elevated twin deficits, which have resulted in almost
halving of growth from 2010. This had fanned inflationary pressures in the economy. Along with these structural
deficiencies, the partial rollback of the US Fed’s monetary stimulus, pummeled the already weak rupee in mid-2013,
further adding to imported inflation. Policy measures taken by the RBI in an attempt to control inflation and stem the
rupee’s fall include hiking interest rates, restricting the import of gold and other non-essential commodities, and raising
the dollar-borrowing limit for banks. This move has helped in narrowing the current account deficit. Business sentiment
has revived strongly in the country with the formation of a stable government in 2014. The stock market has rallied from
the moment it was evident that the Modi government would come to power. The policy paralysis that had stalled growth
and hampered the investment sentiment has been improving with the decisive victory of Mr. Modi; in addition, Mr. Modi

Economic Landscape
has also stated his plans to ease the business environment and reduce policy uncertainty, which made investors
skeptical of investing in India.
In spite of this, new government has to do a lot, especially in stepping up infrastructure investments. A lot depends on
the government’s push towards passage of land bill, due to which a lot of infrastructure investments are pending. Decline
in the asset quality of the public sector banks and saving rates are yet another concern. High tax rates and low level of
compliance towards them is another deterrent to the growth.
Concluding, high tax rates, delay in passage of key reforms, infrastructure bottlenecks, high insolvency and debt
recovery status continue to hurt India’s global image in the short run. Much is expected in the remaining tenure of the
current government; in order make India’s pitch stronger in the world as a business friendly destination.
The new GST bill passed by the government is expected to benefit the economy in the long run. However, the
demonetization move by the central bank may slower the GDP growth rate in short term.

Social Landscape
SOCIAL LANDSCAPE
Summary
Almost 70% of the people of India live in rural areas; rapid urbanization is expected to cause socioeconomic problems in
the country. Males have always dominated the sex ratio in India. The country has regularly introduced policies to control
its growing population. India has a multicultural ethnic fabric, and its citizens have the freedom of religion.
The National Health Policy of 2002 has provisions for the healthcare sector, while the education scenario has been
consistently growing in terms of both government expenditure and the number of education institutions. The government
has also launched free healthcare facilities for the poor since 2008. More than half of the married women in both urban
and rural areas are anemic, around one-third of the women are underweight, and around 40% of children under five are
severely and chronically malnourished. The United Nations Development Programme's Human Development Report
2014 placed India 130th out of 188 countries in terms of human development, which is lower than the other BRIC
economies and many poor African nations.
Evolution
Family welfare plans
In 1951, India became the first country in the world to launch a family planning program in an attempt to control
population growth. Since then, the program has undergone a variety of reforms. During 1951 to 1975, the nation’s
population policy developments were primarily conducted through the successive five year plans initiated by the
government. The first five year plan (1951–56) recognized the need for a population policy. This was followed up over a
series of five year plans (until the fifth five year plan of 1974–79) advocating stabilizing population growth over a period of
time. It was not until a declared state of emergency in 1975–77 that a harsher approach was taken toward population
control, in the form of forcible mass sterilization.
Once the state of emergency was lifted, the Janata Party government announced that coercion would not be used to
implement the family planning program, which was then renamed the family welfare program. Over the years that
followed, the program came to be viewed as a national effort to provide a better life for the Indian people. The series of
plans that followed recognized the need for contraception and a reduction in infant and maternal mortality rates, and
consistently emphasized the need to considerably reduce birth rates. More recent plans have also emphasized the
importance of reducing the desired number of children. The major focus of the family welfare program shifted away from
population control toward healthcare under the 10th five year plan. It aimed to ensure that families had improved access
to medical facilities and higher quality healthcare to enable them to achieve their reproductive goals.
Under the 11th five-year plan (2007–12), the Working Group on Population Stabilization was formed by the planning
commission with the primary objective of reviewing the current demographic projections for the 11th plan and beyond, by
which time the country’s population is likely to stabilize, and to review the goals outlined in the National Population Policy
of 2000.
Social security reforms in India
Pension reforms
Prior to independence, a number of firms established provident funds for their employees. By 1948, these funds had
grown to more than $20 million, or around 3% of all assets held by financial institutions. When the Employees' Provident
Fund (EPF) Act was passed in order to regulate existing provident funds and expand coverage to new industries in 1952,

Social Landscape
roughly 1.2 million workers were covered. Provident fund assets were equal to around 2% of GDP. The Employees'
Provident Fund Organization (EPFO) was set up in 1952, and its schemes are designed for private sector workers in
organizations with more than 20 employees across 177 industry categories. The EPFO does not come under the purview
of an overall regulator, but there are three sets of legislation through which provident and pension funds in India are
regulated. These are the Income Tax Act of 1961, the EPF Act of 1952, and the Indian Trusts Act of 1882. Between 1952
and 1998, the number of industries covered by the EPF increased from six to 177, and the number of workers covered
has grown to more than 21 million.
In 1971, a pension program for surviving family members of EPF members, the Family Pension Scheme (FPS), was
introduced. Five years later, the Employees’ Deposit Linked Insurance program added a life insurance policy that paid a
lump sum benefit based on the balance of the EPF account. In 1995, the FPS was replaced by the Employee Pension
Scheme (EPS). The EPS paid an annuity to those retiring from the system in addition to survivors’ benefits that had been
paid under the FPS. The most significant change was the diversion of part of the EPF contribution to finance the new
annuity. This converted part of the defined contribution scheme, paying a lump sum to defined benefit with an annuity.
The Indian pension reform saga began in 1998. The policy thinking on perhaps the most important second generation
economic reform for India originated with the Ministry of Welfare – later renamed the Ministry of Social Justice and
Empowerment – which is responsible for the care and welfare of the elderly and vulnerable.
Age distribution
According to MarketLine, around 66.1% of the Indian population was in the 15–64 age group; 5.9% was in the 65 and
above group; and the remaining 28% belonged to the 0–14 age group in 2015. The median age in India was 27.6 years
in 2016, according to CIA – The World Factbook, which indicated a young population.

Social Landscape
Table 13: Mid-year population by age (% of total population), 2015
Mid-year population by age Female Male

0–4 9.3 9.4
5–9 9.1 9.6
10–14 9.1 9.6
15–19 9 9.5
20–24 8.6 9
25–29 8.2 8.3
30–34 7.8 7.8
35–39 7.3 7.2
40–44 6.8 6.6
45–49 6 5.7
50–54 5 4.8
55–59 4.1 3.9
60–64 3.3 3
65–69 2.5 2.3
70–74 1.8 1.6
75–79 1.2 1
80+ 0.9 0.7
Religious composition
Hinduism is the largest religion, and is practiced by 79.8% of the total population. This is followed by Islam (14.2%),
Christianity (2.3%), Sikhism (1.7%), others and unspecified (2.0%). India is a secular nation, and people are free to
practice any religion. Apart from Hinduism, Islam, Sikhism, and Christianity, religions such as Buddhism, Jainism, and
Zoroastrianism are also practiced.

Social Landscape
Figure 34: Major religions in India as of 2011
Others& Unspecified,
Sikh, 1.7% 2%
Christian, 2.3%
Muslim, 14.2%
Hinduism, 79.8%
Source: CIA - The World Factbook MARKETLINE
Education
Overview
India has been a major seat of learning for thousands of years. Some of the country's educational institutes—such as the
Indian Institutes of Technology, the Indian Institute of Science, the Indian Institute of Management, the All India Institute
of Medical Sciences, the Indian Statistical Institute, the Tata Institute of Fundamental Sciences, and the Indian School of
Business—are among the world's most renowned centers of learning. The nation is also dealing with challenges in its
primary education system, and is striving to achieve a 100% literacy rate. Compulsory universal primary education
remains a challenge, as it has been difficult to keep poor children in school and maintain the quality of education in rural
areas. Kerala is the only Indian state to reach this goal so far. All levels of education, from primary to higher, are
overseen by the Ministry of Human Resource Development (specifically the Department of Higher Education India and
the Department of School Education and Literacy), and are heavily subsidized by the Indian government, although there
have been moves to make higher education partially self-financing.
System of education
The Indian education system prescribes 12 years of school prior to three or four years for a bachelor’s degree. This can
be followed two years of study for a master’s degree. In some universities, it is mandatory for candidates to qualify as a
Master of Philosophy before they can apply for a doctorate.
There are four stages of school education in India, namely primary, upper primary, secondary, and higher secondary (or

Social Landscape
high school). Overall, compulsory schooling lasts 12 years. However, there are considerable differences between the
various states in terms of the organizational patterns within the first 10 years of schooling. The government is committed
to providing a universal elementary education (primary and upper primary) for all children aged six to 14 years. Primary
school includes children of ages six to 11, organized into classes one through five. Upper primary and secondary school
pupils aged 11 through 15 are in classes six to 10. The higher secondary school has students aged 16 through 17, and
they are enrolled in classes 11 through 12. In some areas, there are middle/upper primary schools for grades six to eight;
in such cases, grades nine to 12 are classified under the high school category. Higher education in India provides an
opportunity to specialize in a field and includes technical schools, colleges, and universities.
In India, the main types of schools are controlled by:
 the state government boards
 the Central Board of Secondary Education
 the Council for the Indian School Certificate Examinations board
 the National Institute of Open Schooling
 "international schools", which are similar to schools in the West in pattern and methods of instruction and are
considerably more expensive than regular schools. They follow the syllabus of the International Baccalaureate
(IB) or any one of the above councils or boards.
Higher education in India has evolved in distinct and divergent streams, each of which is monitored by an apex body
indirectly controlled by the Ministry of Human Resource Development and funded by the state governments. Most
universities are administered by the states; however, there are a number important universities—known as central
universities—which are financed by the central government. The increased funding received by the central universities
gives them an advantage over state universities.
Healthcare
Healthcare services
The Health and Family Welfare Department in India makes constant and concerted efforts to formulate and execute
schemes to ensure adequate healthcare services in line with the National Health Policy. While implementing these
schemes, steps are being taken to improve the healthcare system to cater to the country's health needs.
Several national health programs are being implemented as centrally sponsored schemes aimed at reducing mortality
and morbidity due to major diseases. The major health schemes include national programs for the eradication of malaria,
blindness, leprosy, tuberculosis, and AIDS, and the control of sexually transmitted diseases and cancer. Special attention
is being paid to trauma and spinal injuries. Pilot projects have also been taken up with regard to cardiovascular diseases,
diabetes, and the rehabilitation of the medically disabled. Moreover, the New National Urban Health Mission has also
been launched in 2013, supplementing the already existing National Rural Health Mission, started in 2005. The key
private institutions providing healthcare in India are Apollo, Escorts, and Max India. Other than these, there are a large
number of regional/city-specific hospital chains. India has one of the biggest networks of private hospitals in the world.
The inherent advantages, such as the quality of treatment and cost benefits, have opened up new avenues such as
medical tourism. These centers have the necessary pool of medical professionals, infrastructure, and experience to treat
quality-conscious patients from the west.

Social Landscape
Social welfare
Social welfare policies
The Department of Social Welfare in India provides various schemes at the state and central levels. The National
Program for Rehabilitation of Persons with Disabilities is one example of a state sector program; this scheme provides
rehabilitation services to persons with disabilities, from the district level to the village level, in a structured manner. Under
this scheme, support is extended to state governments to set up state and district-level rehabilitation services. In
addition, five composite regional centers and four regional rehabilitation centers for people with spinal injuries have been
set up with the assistance of the ministry.
The Social Defense Bureau of the ministry caters to the requirements of neglected and marginalized people, including
abandoned, destitute, neglected, and delinquent juveniles who need care and protection as they lack support or are in
conflict with society or the law; drug addicts and offenders; the elderly; and the many others that need special care,
protection, and support. The bureau promotes voluntary action, and state governments, autonomous bodies, non-
governmental organizations, and even the corporate world are involved in formulating and implementing policies. All
such programs are meant to prevent neglect, abuse, and exploitation, and to provide assistance to the deprived and
those marginalized by society.
Social security
India has a weak social security system. There is no compulsory health insurance covering the entire population. The
Employees' Provident Fund (EPF) and the Employee Pension Scheme (EPS) provide pension cover to employees within
the organized sector, who make up just around 8% of the workforce. In the case of the EPF, both employees and
employers contribute 12% of their basic salary. The Employees Provident Fund Organisation (EPFO), with consent from
the Finance Ministry, announces the interest rate on the provident fund deposits each fiscal year.
The government implemented the New Pension System (NPS) in 2004 to facilitate a shift from a defined benefit system
to a defined contribution system. At present, the NPS covers all central government employees who joined service after
January 1, 2004, as well as the employees of state governments/ Union Territories, who had agreed to join the pension
scheme. The scheme is voluntary for self-employed individuals, private companies and the unorganized sector.
Performance
Healthcare
Overview
In 2014, the country spent 4.01% of GDP on healthcare, according to MarketLine. This level of spending remains
inadequate considering the scale of the healthcare scarcity in the country. People in rural areas are mostly deprived of
healthcare, and people in towns avoid going to state-run hospitals, as these tend to be inefficient and overcrowded.
Private healthcare is expensive and beyond the reach of the poorer sections of Indian society.
Given the situation, it is no surprise that the reach and quality of public health services has been below desirable
standards. Under the constitutional structure of India, public health is the responsibility of the individual states. In this
framework, it has been the expectation that the principal contribution for the funding of public health services will be from
the resources of the states, with some supplementary input from central resources. The fiscal resources of the state
governments are known to be very inflexible. This is mirrored in the very low percentage of state resources allocated to
the health sector by the central government. If public health services in the country are to improve notably, then
substantial resources need to be channeled into the health sector from the central government budget. The National

Social Landscape
Health Policy of 2002 was formulated taking into consideration these realities.
Due to the gravity of the healthcare shortages that the country faces, it must make a major effort to bring healthcare
within the reach of the majority of its citizens.
Figure 35: Healthcare expenditure in India, 2008–14
90.00 4.10
80.00 4.05
70.00
4.00
60.00
3.95
Percentage (%)
50.00
3.90
$ billion
40.00
3.85
30.00
3.80
20.00
10.00 3.75
0.00 3.70
2008 2009 2010 2011 2012 2013 2014
Year
Total Healthcare Expenditure Total Healthcare expenditure as % of GDP
The Indian healthcare providers sector has experienced strong, double digit growth in recent years. This is predicted to
continue throughout the forecast period, albeit decelerating into single-digit growth in 2019 and 2020.
The Indian healthcare providers sector had total revenues of $111.7 billion in 2015, representing a compound annual
growth rate (CAGR) of 17% between 2011 and 2015. In comparison, the South Korean and Chinese sectors grew with
CAGRs of 6.5% and 13%, respectively, over the same period, to reach respective values of $103.5 billion and $637.8
billion in 2015.
Growing urbanization and a range of unhealthy lifestyle trends (such as changing diets and rising obesity levels) have
propelled this market, despite patchy coverage in the country, where many rural consumers can't access adequate
healthcare and many hospitals and clinics are overcrowded and underfunded. Lifestyle changes have significantly
affected the more urban population: around 50% of inpatient beds are for lifestyle diseases, and India has 65 million
sufferers of diabetes, one of the world's highest numbers.
In India, private health expenditure is high (just over 63%). This is because of low government spending and high out-of-
pocket payments for health care. In fact, India has one of the highest out-of-pocket spending rates in the world.

Social Landscape
The outpatient care segment was the sector's most lucrative in 2015, with total revenues of $45.2 billion, equivalent to
40.5% of the sector's overall value. The inpatient care segment contributed revenues of $27.5 billion in 2015, equating to
24.6% of the sector's aggregate value.
The performance of the sector is forecast to decelerate, with an anticipated CAGR of 9.8% for the five-year period 2015–
20, which is expected to drive the sector to a value of $178.6 billion by the end of 2020. Comparatively, the South Korean
and Chinese sectors will grow with CAGRs of 4.9% and 8%, respectively, over the same period, to reach respective
values of $131.7 billion and $937.7 billion in 2020.
Income distribution
Standard of living
According to the World Bank, the poverty headcount ratio at $1.90 per day (2011 PPP), i.e. the population living below
$1.90 per day, was 21.23% in 2011. Almost 57.96% of the population was living below $3.10 per day in 2011. This
consists of daily wagers, self-employed households and landless laborers. Despite registering rapid economic growth
during the first decade of the 21st century, India is faced with massive income disparity. While some Indians number
among the richest people in the world, many of their compatriots lack access to basic necessities. On the Gini coefficient,
which ranges from zero (perfect equality) to 100 (perfect inequality), India scored 33.6 in 2014, according to the UNDP
Human Development Report 2015.
Education
According to MarketLine, public expenditure on education remains low at 4.04% of GDP in 2014, especially considering
the low literacy rates in the country, the government must spend more on this sector. The literacy rate for people above
the age of 15 stood at 71.2% in 2015, according to CIA –The World Factbook. There were 81.3% literate males as
compared to only 60.6% literate females in 2015. India lags far behind other competing nations such as China, where the
literacy rate is more than 90%. The country needs to invest significantly in improving literacy rates, especially among
women.

Social Landscape
Figure 36: Public education expenditure in India, 2010–14
90.00 4.50
80.00 4.00
70.00 3.50
60.00 3.00
Percentage (%)
50.00 2.50
$ billion
40.00 2.00
30.00 1.50
20.00 1.00
10.00 0.50
0.00 0.00
2010 2011 2012 2013 2014
Year
Expenditure on education Expenditure as % of GDP
Outlook
India has developed a complex social security system since gaining independence, which is due for major reform.
Reforms will need to enhance the professionalism with which provident and pension fund schemes and organizations are
designed and governed.
Life expectancy has doubled since independence, although more work is still required on this front. In terms of life
expectancy, India does not compare well with countries such as China, which is the most populous nation in the world.
India’s growing young population gives it access to a huge active workforce, which gives it a significant edge over
developed and developing nations. This will remain a competitive advantage for the country in the future if equipped with
adequate skills.
However, obstacles such as poor human development and rising disparities continue to plague the system. The widening
disparity between the poor and the rich is a point of major concern, not only in economic terms but also at a social level.
Lower literacy levels and the slow speed of job creation have further aggravated the problem. Failure to address these
problems can counter the positives that the country should enjoy from demographic dividend, with the fears of whole
potential of the generation being lost. The fact remains that growth and development is concentrated only within certain
segments, which results in a limited section of the population having greater economic opportunities while the remainder
are deprived of very basic requirements; this situation can result in social unrest, and the country has already seen this
happen in certain underdeveloped regions.

Technological Landscape
TECHNOLOGICAL LANDSCAPE
Summary
In 1948, the Indian government announced its plan to set up infrastructural facilities for research and development. Over
the years, the focus has shifted toward technological development and integrating R&D into all sectors of the economy.
The Ministry of Science and Technology is the regulatory authority for R&D in India, and all the different research
branches, such as biotechnology and industrial research, come under its authority. The government has declared the
decade starting from 2010 as the "decade of innovation". With regard to the pharmaceuticals industry, India is becoming
a hub for R&D. In terms of securing patents, the country has traditionally been very slow, but recent years have seen a
consistent improvement.
The Telecom Regulatory Authority of India (TRAI) regulates the nation's telecommunications sector. After the IT sector
boom, the telecommunications sector has picked up speed, and the TRAI has formulated policies for telephone and
Internet services.
Evolution
IT
The IT sector is now among the fastest-growing segments in the country. IT professionals work in all major markets
around the world, and Indian technology products and solutions are globally accepted. The technology landscape in India
has evolved through various phases since independence; however, the sector has received a real boost since the early
1990s. Some of the major developments since this time have included the emergence of IT service providers from India,
IT projects being outsourced to these providers, captive units being set up in the country by global companies, and
increased Internet take-up in the last part of the decade. The early years of this millennium were characterized by the
global rise, and subsequent fall, of the dot-com industry.
India enacted the Information Technology Act in 2000, which provides a legal framework to facilitate electronic
commerce and electronic transactions and recognize electronic contracts; it also covers the prevention of computer
crimes, electronic filing/documentation, and digital signatures, among others. In line with global practices, the vital
security needs of privacy, authenticity, integrity, and non-repudiation over the Internet are being addressed.
Telecommunications
In 1985, the Department of Telecommunications—an exclusive provider of domestic and long-distance services—was
established and the following year it was converted into two fully owned government companies: Videsh Sanchar Nigam
Limited, for international telecommunications, and Mahanagar Telephone Nigam Limited, for services in metropolitan
areas. The TRAI was created in 1997. In 1999, cellular services were introduced in the country and as the new
millennium dawned, the Telecom Disputes Settlement and Appellate Tribunal was formed. The national long-distance
service was also opened up for private participation, and Bharat Sanchar Nigam Limited was created. By the end of
2016, almost all major service providers have started 4G services in the country.
Intellectual property
In India, the Patents Act came into force in 1972, after which it was amended in 1999, 2002, and 2005. The third
amendment to the Patents Act 1970, by way of the Patents (Amendment) Ordinance 2004, came into force on January 1,
2005, incorporating provisions for granting product patents in all fields of technology including chemicals, food, drugs,
and agrochemicals. India has been slow to establish a foothold in the area of patents, but has improved of late, with its
number of patents increasing gradually in the fields of computer science, electronics, and biotechnology in recent years.
R&D
The Ministry of Science and Technology in India is the regulatory authority for R&D. The three departments that come
under this ministry are the Department of Biotechnology, the Department of Science and Technology, and the
Department of Scientific and Industrial Research. Apart from these, there are several other autonomous and private
bodies that independently work on R&D.
The Department of Science and Technology has placed great emphasis on identifying and promoting frontline and
priority areas in various disciplines of science and engineering for R&D. This support is provided through the Science
and Engineering Research Council, an advisory body consisting of eminent scientists and technologists drawn from
academic institutions such as the Indian Institutes of Technology, universities, national laboratories, and industry.
Technology agreements and pacts
The international co-operation and bilateral trade division of the Department of Information Technology was set up to
promote international co-operation in the emerging and frontier areas of IT under a bilateral, multilateral, or regional
framework. Such interaction provides an opportunity to share knowledge and experience with other countries,
international bodies, academia, and institutions by forging partnerships for mutual progress.
The Department of Information Technology has entered into memorandums of understanding for co-operation with
countries such as Australia, Brazil, France, Hungary, Israel, Japan, Russia, and South Africa. The scope of co-operation
envisaged includes IT software (including telecom software), IT-enabled services, e-commerce services and information
security, electronic governance, IT and electronics hardware, IT education and IT-enabled education, and R&D. Under
these memorandums of understanding, joint working groups have been set up as an institutional arrangement.
Performance
Important sectors
India’s technological space offers significant opportunities for the future. The performances of some of the technology-
intensive sectors are provided below.
Telecommunications and Internet
According to MarketLine, mobile penetration stood at 75.36 per 100 people, with subscribers totaling 945.14 million in
2015. Total internet users stood at 223.29 million in 2014, with 18.02% penetration rate.

Figure 37: Internet users in India, 2010–14
250.00 20.00
223.29
18.00
200.00 16.00
185.00
14.00
Internet users in millions
152.18
Percentage (%)
150.00 12.00
120.24 10.00
100.00 88.37 8.00
6.00
50.00 4.00
2.00
0.00 0.00
2010 2011 2012 2013 2014
Year
Number of Internet users Percentage of population
The Indian telecommunication services market experience experienced very weak growth in recent years. This is
forecast to improve dramatically between 2016 and 2020, with very strong growth forecast for this period.
Further growth in the Indian market will by driven by increasing numbers of subscribers, especially in the wireless
segment. There is a great deal of scope for the major players to grow their customer bases, as mobile cellular
penetration rates were sitting at a relatively low 74% of the country’s population according to the World Bank’s December
2014 figures.
The Indian telecommunication services market is expected to generate total revenues of $37.6 billion in 2015,
representing a compound annual growth rate (CAGR) of 0.2% between 2011 and 2015. In comparison, the South
Korean and Chinese markets will grow with CAGRs of 9% and 7.4%, respectively, over the same period, to reach
respective values of $40.6 billion and $183.2 billion in 2015.
Market consumption volume is forecast to increase with a CAGR of 3.2% between 2011–15, to reach a total of 1,064.9
million subscribers in 2015. The market's volume is expected to rise to 1,482.8 million subscribers by the end of 2020,
representing a CAGR of 6.8% for the 2015–20 period.
The wireless segment is expected to be the market's most lucrative in 2015, with total revenues of $33.1 billion,
equivalent to 88% of the market's overall value. The fixed line segment will contribute revenues of $4.5 billion in 2015,
equating to 12% of the market's aggregate value.
The performance of the market is forecast to accelerate, with an anticipated CAGR of 13.7% for the five-year period
2015–20, which is expected to drive the market to a value of $71.4 billion by the end of 2020. Comparatively, the South
Korean and Chinese markets will grow with CAGRs of 4.1% and 5.6%, respectively, over the same period, to reach
respective values of $49.7 billion and $240.9 billion in 2020.
Research & Development
R&D expenditure
India’s gross expenditure on R&D as a percentage of GDP was around 0.8% in 2011, according to the World Bank. This
was lower than those of the other BRIC economies China (2% in 2014), Russia (1.2% in 2014), and Brazil (1.2% in
Patents
In terms of securing patents, India has traditionally been very slow, but recent years have seen a consistent
improvement. The number of patents received by India from the United States Patent and Trademark Office (USPTO)
has increased from 1098 in 2010 to 3355 by 2015. However, in comparison to China, the number of patents remains
very low.
Table 14: Patents granted by USPTO, 2010–15

2010 2011 2012 2013 2014 2015
China 2655 3174 4637 5928 7236 8116
India 1098 1234 1691 2424 2987 3355
South Africa 116 123 142 161 152 166
Russia 272 298 331 417 444 440
Brazil 175 215 196 254 334 323
Source: USPTO MARKETLINE
Outlook
The IT and IT-enabled services growth story in India has been one of the most talked about among the services sector,
and the segment has made a significant contribution to the country’s GDP in recent times. The sector garnered $146
billion of revenue in 2015 as per National Association of Software and Services Companies (NASSCOM) figures. The
industry is poised to be worth $225 billion by 2020. Factors such as progressive government policies and the strong
talent pool are expected to drive the sector. Nevertheless, a low level of high technology exports points to weaknesses in
high end manufacturing, and the country's weak intellectual property rights regime remains a challenge. Push for smart
cities might give a fresh start to the technological landscape, but a lot depends on implementation.

Legal Landscape
LEGAL LANDSCAPE
Summary
In India, the Supreme Court is the highest court, followed by high courts in every state and district courts in the smaller
judicial zones. The laws of the Indian penal code are defined by punishment, deterrence, incapacitation, and
rehabilitation: the four theories of criminal justice. Under the constitution, parliament has the power to make laws for the
whole or any part of the Indian territory. The state legislatures make laws for the states. The subjects on which legislation
can be enacted are specified in the seventh schedule of the Constitution of India. The country has an exhaustive legal
framework governing all aspects of business, with one of the most important laws in this space being the Companies Act,
1956; a more comprehensive Companies Act 2013 has replaced it from 2013.
Evolution
India's independence paved the way for the Constitution of India. The current legal scenario in the country is open to
amendments to suit the changing demands of circumstances and events.
The Companies Act, 1956 and the Indian Contract Act, 1872 are the two laws that regulate business and corporate
bodies. Since the country's liberalization in 1991, foreign direct investment has increased, making India one of the
leading investment destinations in the world, while legal procedures have been reduced. Labor laws in India focus on the
payment of wages, employee welfare, and working hours and conditions. There is a separate Child Labor Act, 1986,
which protects deprived children. Taxation is based on the income generated by both individuals and companies. Trade
in India is regulated by the Foreign Trade Act, 1992. VAT was adopted by India in 2004 as part of the restructuring of the
country's tax system.
In the area of corporate governance, 1992 was a watershed year. The intense debate surrounding corporate governance
gathered pace that year. The evolution of some of the key laws, regulations, and codes of corporate governance since
1992 are as follows:
 The establishment of the Securities and Exchange Board of India (SEBI) in 1992, following the infamous
securities scam in the same year. To regulate equity trading on all Indian stock exchanges, the Listing
Agreement was enforced by the SEBI, the Department of Company Affairs, and the Registrar of Companies.
 The National Stock Exchange of India was incorporated in 1992. It provides an alternative stock exchange with
an electronic trading platform and a respite from conflicts at the broker-owned Bombay Stock Exchange.
 In 2000, the SEBI established a committee chaired by Kumar Mangalam Birla, head of one of India’s oldest and
largest conglomerates Aditya Birla Group, to build a corporate governance code for India. Some of the
committee recommendations were mandatory, while others were voluntary. The SEBI approved the Birla
Committee report, and a new clause—Clause 49—was inserted into the listing rules.
Judicial system
Structure of the system
The Supreme Court is the highest court in the country, while the high court’s stand at the pinnacle of each state's judicial
administration. Every state is divided into judicial districts, each of which is presided over by a district and sessions

Legal Landscape
judge, who is the highest judicial authority in the district. On the next tier down there are courts of civil jurisdiction, known
in some states as munsifs, with sub-judges and civil judges. Similarly, the criminal judiciary consists of a chief judicial
magistrate and judicial magistrates of first and second class.
The Supreme Court has original, appellate, and advisory jurisdiction. Its exclusive original jurisdiction extends to all
disputes between the federal and one or more states or between two or more states. The constitution gives extensive
original jurisdiction to the Supreme Court to enforce fundamental rights. The appellate jurisdiction of the Supreme Court
can be invoked by a certificate of the high court concerned or by special leave granted by the Supreme Court in respect
of any judgment, decree, or final order of a high court in both civil and criminal cases, involving substantial questions of
law as to the interpretation of the constitution. The president may consult the Supreme Court on any question of fact or
law of public importance.
The Supreme Court of India comprises the chief justice and a number of other judges appointed by the president. The
chief justice of a high court is appointed by the president in consultation with the chief justice of India and the governor of
the state. Each high court has powers of superintendence over all courts within its jurisdiction.
The district courts or civil courts of India are presided over by a judge. They administer justice in India at a district level.
These courts are under the administrative and judicial control of the high court of the state to which the district concerned
belongs. Lok Adalats (people’s court) are voluntary agencies for the resolution of disputes through conciliatory methods.
Relations between the central government and the states
Under the constitution, parliament has the power to make laws for the whole of or any part of the territory of India, while
the state legislatures have the power to make laws for the states. The subjects on which legislation can be enacted are
specified in the seventh schedule of the constitution.
Parliament has the exclusive right to legislate in respect to items appearing on the Union List, including areas such as
defense, foreign affairs, currency, income tax, excise duty, railways, shipping, posts, and telegraphs.
State legislatures have the exclusive power to make laws in relation to items appearing on the State List, including public
order, police, public health, communications, agriculture, lotteries, taxes on entertainment and wealth, sales tax, and
state customs.
The parliament and the state legislatures have the power to legislate on items appearing on the Concurrent List,
including electricity, newspapers, criminal law, marriage and divorce, stamp duties, trade unions, and price controls.
Tax regulations
India has a well-developed tax structure. The power to levy taxes and duties is distributed among the three tiers of
government, in accordance with the provisions of the Constitution of India. The main taxes and duties that the federal
government is empowered to levy are income tax (except tax on agricultural income, which the state governments can
levy), customs duties, central excise and sales tax, and service tax. The principal taxes levied by state governments are
sales tax (tax on intrastate sale of goods), stamp duty (duty on transfer of property), state excise (duty on production of
alcohol), land revenue, duty on entertainment and tax on professions. The local bodies are empowered to levy tax on
properties, tax on the entry of goods for use/consumption within areas of control, tax on markets, and tax/user charges
for utilities such as water supply and drainage.
Individual income tax
Personal income tax is levied by the central government and is administered by the Central Board of Direct Taxes under
the Ministry of Finance in accordance with the provisions of the Income Tax Act. The income tax rates are progressive up
to 30%, additional cess also applies. A 12% surcharge is also applicable for income above INR10 million ($148,171).
Legal Landscape
Withholding tax
Current rates for withholding tax for payment to non-residents are interest at 20% and royalties at 10%. Dividends paid
by domestic companies are exempt from tax in the hands of the resident.
Corporate tax
Corporate profits in India are taxed at a rate of 30% for domestic companies and 40% for foreign companies. Additional
surcharges also apply.
Other local taxes
Other taxes include dividend distribution tax, excise tax, import duties, research and development cess, service tax,
stamp duty, state sales taxes, payroll tax, wealth tax and social security tax.
Labor law
The Ministry of Labor and Employment is responsible for protecting and safeguarding the interests of workers in general.
For the purposes of labor legislation, an important distinction is made between workers in the organized/formal sector
and those in the unorganized/informal sector. Out of the country's total workforce, 92% work in the informal sector while
only 8% work in the formal sector. For the unorganized sector, the most relevant instrument is the Minimum Wages Act,
1948. This law governs the methods used to fix minimum wages in scheduled industries (which may vary from state to
state) by using either a committee method or a notification method. The stipulated working hours are eight hours per day.
A permanent worker can be removed from service only on reaching retirement age, for proven misconduct, or for
habitual absence due to ill health, alcoholism, etc. The existing legal framework does not support a "hire and fire" policy.
There are around 10 major central unions of workers founded upon different political ideologies, and almost every union
is affiliated to one of these. These central organizations have state branches, committees, and councils from which their
organization feeds down to the local level.
Social security
The Ministry of Labor and Employment has set up a social security division that deals with the framing and
implementation of social security policy and schemes for workers, as well as the administration of all legislation relating
to social security. Some of the laws regulating and ensuring the security of the working population are the Payment of
Gratuity Act, 1972; the Employees and Miscellaneous Provisions Act, 1952; and the Employees State Insurance Act,
1948.
Performance
Effectiveness of the legal system
According to the World Bank's 2017 Doing Business report, time to start a business, enforcement of contracts, dealing
with construction permits, and paying taxes are the key constraints to doing business in India. Overall, the country has
been ranked 130th out of 190 countries. Foreign equity ownership is restrictive in many sectors, and the regulatory
barriers are far higher than in competing emerging economies. Starting a business in India takes more time compared to
its South Asian peers. The inadequate resources allocated to the law and justice department takes a toll on the potential
and efficiency of the justice system, which at present is characterized by chronic delays; in particular, civil litigation takes
an extraordinarily long time.

Legal Landscape
Outlook
Legal and regulatory aspects are crucial to a successful business environment in any country. India has a
comprehensive legal framework for business entities, which has driven business growth; however, plenty of work still
needs to be done on the proper implementation of laws and regulations. Although it can be stated that the legal system
in the country provides a fair, equitable, and transparent framework for both employers and employees, there are clearly
still many issues that need to be addressed if India is to effectively compete on the global stage. Weak product market
regulations remain a major problem for the country, curbing its ability to procure stable financing and technology.
In terms of corporate governance, the laws in place are rendered almost worthless by a lack of committed
implementation. The new Companies Act aims to improve corporate governance by introducing a more effective legal
and administrative framework; nevertheless, corporate governance is largely driven by factors such as management
commitment to the principles of integrity and transparency in business operations.
Observers in India have voiced concerns over the lack of a single regulator for the financial sector. A single financial
regulator reflects the nature of modern financial markets, where distinctions between different sectors and products have
broken down. A single regulator brings many advantages, including greater efficiency, economies of scale, improved
information sharing, and clear accountability. However, it remains to be seen whether a single regulator will be
introduced in the near future.

Environmental Landscape
ENVIRONMENTAL LANDSCAPE
Summary
In India, the Ministry of Environment and Forests (MEF) has responsibility for drafting and implementing policies on
environmental protection and sustainable development. The MEF is responsible for ensuring that all commitments arising
from international treaties or agreements are met and ensures that environmental policies focus on long-term
sustenance—especially considering India’s rapid economic development. Currently, greenhouse gas emissions are a
major issue for many countries, and India is no exception. Although the country has relatively low emissions per capita, it
has taken steps to promote renewable energy (such as hydroelectric power) and clean energy (such as nuclear power)
to reduce its dependence on fossil fuels and its environmental impact.
Evolution
The Indian Constitution is relatively unusual in that it contains specific provisions for the protection of the environment.
India has expressed its national commitment to the protection and improvement of the environment through its state
policy. Various acts relating to the environment have been passed since the country gained independence. Some of the
most important of these are listed below:
 the Indian Forests Acts
 the Factories Act of 1948
 the Mines Act of 1952
 the River Boards Act of 1956
 the Atomic Energy Act of 1962
 the Wildlife Act of 1972
 the Water (Prevention and Control of Pollution) Act of 1974
 the Air (Prevention and Control of Pollution) Act of 1981
 the Environmental Protection Act of 1986
 the Public Liability Insurance Act of 1991
 the Noise Pollution (Regulation and Control) Rules of 2000
 the Coastal Zone Related Acts
 the Hazardous Substances Act.
India has also played its part on the international stage with regards to recent treaties and agreements aiming to tackle
climate change and other environment-related issues. The Indian government has signed a number of international
treaties including the United Nations Framework Convention on Climate Change (UNFCCC), which was signed in 1992
and ratified in 1993, and the Kyoto Protocol, which was ratified in 2002 and 2011. In 2016, India ratified the Paris Climate
change agreement at UN. The country committed that at least 40% of the energy will be generated by non-fossil sources
by 2030.
The MEF laid out its overall policy framework in the National Environment Policy 2006. The policy describes specific
measures that the government plans to take to curb air, water, soil, and noise pollution. The government also follows a

sector-specific policy approach, which covers the power, industrial, agricultural, and transport sectors.
Environmental regulations
Overview
The MEF is the nodal agency in the administrative structure of the central government, responsible for planning,
promoting, co-ordinating, and overseeing the implementation of environmental and forestry programs. The ministry is
also the nodal agency in the country for the UN Environment Program.
The principal activities undertaken by the MEF are the conservation and survey of flora, fauna, forests and wildlife; the
prevention and control of pollution, afforestation, and regeneration of degraded areas; and the protection of the
environment. The main tools utilized for this include surveys, impact assessment, pollution control, regeneration
programs, support for other organizations, research, and training to augment the requisite manpower, collection, and
dissemination of environmental information and the creation of environmental awareness among all sectors of the
country's population. The organizational structure of the ministry covers a number of divisions, directorates, boards,
subordinate offices, autonomous institutions, and public sector undertakings.
Policy
The present national policies for environmental management are contained in the National Forest Policy, 1988; the
National Conservation Strategy and Policy Statement on Environment and Development, 1992; and the Policy Statement
on Abatement of Pollution, 1992. Some sector-specific policies such as the National Agriculture Policy, 2000, the
National Population Policy, 2000, and the National Water Policy, 2002 have also contributed to environmental
management. All these policies recognize the need for sustainable development in their specific contexts, and formulate
necessary strategies to influence this. The National Environment Policy seeks to extend the coverage, and thus fill in
gaps that still exist in light of present knowledge and accumulated experience. It does not displace earlier policies, but
rather builds upon them.
The National Environment Policy is also intended to be a statement of India's commitment to international efforts. It
briefly describes the key current and future environmental challenges facing the country, the objectives of the
environment policy, normative principles underlying policy action, strategic themes for intervention, broad indications of
the legislative and institutional development needed to accomplish the strategic themes, and mechanisms for
implementation and review. It has been prepared through a process of extensive consultation with experts as well as
diverse stakeholders.
The National Environment Policy is intended to be a guide to action in regulatory reform, programs and projects for
environmental conservation, and also covers the review and enactment of legislation by agencies of the central, state,
and local governments. The dominant theme of this policy is that while conservation of environmental resources is
necessary to secure the livelihoods and wellbeing of all, the most secure basis for conservation is to ensure that people
dependent on particular resources obtain better livelihoods through conservation, rather than suffering from the
degradation of resources. The policy also seeks to stimulate partnerships between stakeholders—such as public
agencies, local communities, academic, and scientific institutions, the investment community, and international
development partners—to harness their resources and strengths for environmental management.

Environmental actions
The MEF has pursued its cause over the years through various projects and schemes, such as those detailed below.
Ecomark scheme
To increase consumer awareness, the Indian government launched the eco-labeling scheme known as Ecomark in 1991,
in order to make it easier to identify environmentally friendly products. Any product that is made, used, or discarded in a
way that significantly reduces harm to the environment can be considered an environmentally friendly product.
The criteria follow a cradle-to-grave approach, from raw material extraction to manufacturing and disposal. The Ecomark
label is awarded to consumer goods that meet the specified environmental criteria and the quality requirements of Indian
standards. The label is therefore a mechanism that allows consumers to make the right environmental choice.
National Afforestation Program
The National Afforestation Program was formulated by centrally sponsored afforestation schemes run by the MEF—
namely the Integrated Afforestation and Eco-Development Projects Scheme, the Area Oriented Fuel Wood and Fodder
Projects Scheme (AOFFPS), the Conservation and Development of Non-Timber Forest Produce including Medicinal
Plants Scheme, and the Association of Scheduled Tribes and Rural Poor in Regeneration of Degraded Forests—with a
view to reducing the multiplicity of schemes with similar objectives, ensuring uniformity in funding patterns and
implementation mechanisms, avoiding delays in the distribution of available funds to the field level, and institutionalizing
participation in project formulation and its implementation. The National Afforestation will operate the scheme and Eco-
Development Board of the MEF as a 100% centrally sponsored scheme (except for the AOFFPS component). The
overall objective is to develop forest resources with public participation, with a focus on improving the livelihood of the
forest-fringe communities, especially the poor.
National Action Program to combat desertification
India is a party to the UN Convention to Combat Desertification (UNCCD), and the MEF is the national co-ordinating
agency responsible for the implementation of the UNCCD in the country. As India is an affected party, a 20 year
comprehensive National Action Program to combat desertification has been prepared. The objectives take a community-
based approach to development, and include activities to improve the quality of life of local communities, raise
awareness of the situation, improve drought management preparedness and mitigation, support locally suited R&D
initiatives and interventions, and strengthen self-governance to boost the empowerment of local communities.
Participation in global efforts, agreements, and pacts
India and the Kyoto Protocol
India ratified the Kyoto Protocol in August 2002, and ratified it for the second time in Durban in December 2011. The
Kyoto Protocol was adopted in 1997, and requires developed countries and transitional economies to reduce their
greenhouse gas emissions by an average of 5.2% below 1990 levels. The MEF is the nodal agency for climate change
issues in India, and has created working groups for the UNFCCC and the Kyoto Protocol.

Performance
Environmental impact
To a significant extent, energy consumption is linked with greenhouse gas emissions. India, being one of the fastest-
growing economies, is ranked among the top countries in the world in terms of primary energy consumption. Coal, oil
and natural gas are the primary commercial energy sources in the country. India’s dependence on commercial energy
has not only increased over the years, but will increase further in the near future. According to MarketLine, India’s CO2
emissions increased by 5.1% in 2013. During 2001–13, CO2 emissions increased by an average rate of 5.29%.
Figure 38: CO2 emissions in India, 2006–13
2500.00 16.00
14.00
2000.00
12.00
Percentage (%)
Metric Tons (Millions)
10.00
1500.00
8.00
1000.00
6.00
4.00
500.00
2.00
0.00 0.00
2006 2007 2008 2009 2010 2011 2012 2013
Year
Volume Growth rate
India has made progress in terms of environmentally sustainable development, being one of the few countries with a
separate ministry dealing with renewable energy. The country has conducted considerable research into new and
environmentally friendly energy technologies, and has initiated programs for the development of two major sources of
clean energy: hydroelectric and nuclear power. Despite the progress, India has been a poor performer on the
Environmental Performance Index (EPI). In an EPI study published in 2016, India was ranked 141st out of 180 countries,
which shows that India needs to do more in terms of preserving its environmental landscape.

Outlook
Rich biodiversity is one of the major environmental assets of India. The country has always had political will at the
highest levels to protect the environment; however, implementation has remained unsatisfactory. Air pollution remains a
major challenge, with India's big cities having suspended particulate matter levels above the World Health Organization's
stipulated safe limit.
The rate at which different sectors in the economy grow also has environmental consequences. Some sectors use
natural resources intensively, and as a result, balancing economic growth and environmental impact will remain a
challenge for an energy-hungry nation like India. The tradeoffs between development and the environment will be crucial
in the years to come. Depleting water resources is another major issue the country has been facing. Initiatives such as
the Clean Ganga project are a step in the right direction, though questions about its effective implementation remain.
As an important developing country, India ratified the Kyoto Protocol for the second time in 2011, which is a welcome
move from the government toward sustainable development. In 2016, India ratified the Paris Climate Change agreement
at UN. The country committed that at least 40% of the energy will be generated by non-fossil sources by 2030.
Moreover, release of funds to tackle the problem of afforestation and commitment towards climate action plan are steps
in right direction, but it is immature to comment on the status of these developments at this moment.

Appendix
APPENDIX
ISO codes of selected countries
Country ISO code Country ISO code

Australia AUS Japan JPN
Austria AUT Korea KOR
Belgium BEL Luxembourg LUX
Canada CAN Mexico MEX
Chile CHL Netherlands NLD
Czech Republic CZE New Zealand NZL
Denmark DNK Norway NOR
Estonia EST Poland POL
Finland FIN Portugal PRT
France FRA Slovak Republic SVK
Germany DEU Slovenia SVN
Greece GRC Spain ESP
Hungary HUN Sweden SWE
Iceland ISL Switzerland CHE
Ireland IRL Turkey TUR
Israel ISR United Kingdom GBR
Italy ITA United States USA
Brazil BRA Indonesia IDN
China CHN Russian Federation RUS
India IND South Africa ZAF

Appendix
Ask the analyst
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their given fields. For any questions or comments about this report you can contact the author directly at
reachus@marketline.com
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Appendix
MarketLine
PESTLE| Country
John Carpenter
AnalysisHouse,
Report:John
IndiaCarpenter Street | ML00002-040/Published 12/2016
London, United Kingdom, EC4Y 0AN
T: +44(0)203 377 3042, F: +44 (0) 870 134 4371
E: reachus@marketline.com

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Country Profile Series

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

Rich biodiversity but depleting water resources is a cause of concern

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

Table 1: India – key fundamentals

2014 2015 2016f 2017f 2018f 2019f 2020f

Source: Country Statistics, MarketLine MARKETLINE

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

Key Facts and Geographic Location ...........................................................................................................................15

Key facts ........................................................................................................................................................................ 15

Geographical location ................................................................................................................................................... 16

PESTLE Analysis .........................................................................................................................................................17

Political analysis ............................................................................................................................................................ 18

Economic analysis ......................................................................................................................................................... 24

Social analysis ............................................................................................................................................................... 31

Legal analysis ................................................................................................................................................................ 48

Environmental analysis ................................................................................................................................................. 54

Political Landscape ....................................................................................................................................................59

Structure and policies .................................................................................................................................................... 62

Structure and policies .................................................................................................................................................... 69

Structure and policies .................................................................................................................................................... 82

Technological Landscape ...........................................................................................................................................90

Structure and policies .................................................................................................................................................... 90

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

Structure and policies .................................................................................................................................................... 99

Performance ................................................................................................................................................................ 101

Outlook ........................................................................................................................................................................ 102

ISO codes of selected countries ................................................................................................................................... 103

Ask the analyst ............................................................................................................................................................ 104

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

Figure 2: Market capitalization (As percentage of GDP), 2015 26

Figure 3: Agriculture value added 27

Figure 4: Youth Unemployment - 2014 28

Figure 6: Growing domestic credit and non-performing loans 30

Figure 7: Median age of BRICS 32

Figure 8: Foreign Tourist Arrivals (FTAs) in India 33

Figure 9: International tourism receipts and expenditure - 2014 34

Figure 10: Health expenditure per capita in BRICS - 2014 35

Figure 11: Growing urban population 36

Figure 12: Average house price index 37

Figure 14: Infant mortality rate 39

Figure 15: Employment to population ratio - 2014 41

Figure 16: Growing digital transactions - 1 44

Figure 17: Growing digital transactions - 2 45

Figure 18: High-technology exports (% of manufactured exports) - 2015 47

Figure 19: Taxes on international trade 50

Figure 20: Charges for the use of intellectual property 51

Figure 21: Annual freshwater withdrawals and water productivity- 2014 56

Figure 22: CO2 intensity 57

Figure 23: India – key political events since independence 60

Figure 24: India – key political figures 62

Figure 25: Composition of Indian parliament after April–May 2014 elections 64

Figure 26: Historical GDP growth in India, 2005–2015 68

Figure 27: GDP and GDP growth rate in India, 2010–20 71

Figure 28: GDP composition by sector in India, 2015 72

Figure 29: India’s agricultural output, 2010–15 73

Figure 30: India’s industrial output, 2010–15 74

PESTLE Country Analysis Report: India ML00002-040/Published 12/2016

Figure 32: India’s external trade, 2011–15 77