Ekonomisk riskbedömning


Population 1,316.9 billion
GDP 1,976 US$
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major macro economic indicators


  2016 2017 2018 (e) 2019 (f)
GDP growth (%) 6.9 7.1 7.2 7.0
Inflation (yearly average, %) 5.5 3.3 5.0 5.2
Budget balance (% GDP) -6.7 -0.9 -3.2 -3.0
Current account balance (% GDP) -0.5 -1.5 -1.0 -1.3
Public debt (% GDP) 69.5 71.0 70.0 69.0

(e): Estimate. (f): Forecast.


  • Diversified growth drivers
  • High levels of savings and investment
  • Efficient private sector; notably services
  • Moderate level of external debt; comfortable foreign exchange reserves


  • High corporate debt and non-performing assets (NPA)
  • Net importer of energy resources
  • Lack of adequate infrastructure
  • Weak public finances
  • Bureaucratic red tape
  • Uncertainties over the Kashmir issue


Growth is expected to rebound from a low base

Real GDP growth will likely improve during the 2018/19 financial year, albeit from a low base. Activity was supported by strong domestic consumption (60% of GDP), after a slowdown in previous years due to demonetisation (withdrawal of the 500 and 1,000 rupee notes), and the introduction of a harmonised goods and services tax (GST). Household consumption continues to struggle from the residual impact of these measures, as their influence over the informal sector – although difficult to quantify – remains significant. However, improved financial integration of the poorest households should support demand in the long term. Inflation is set to reach 5.3% by the end of FY 2018/19and is expected to stay stable in 2019, thanks to subdued core inflation. Food prices benefited from normal monsoon rains. This will allow the Reserve Bank of India (RBI) to pause monetary policy tightening through the first half of 2019, after hiking rates by 75 bps in 2018. Both factors should be supportive of growth, leading to a slight pickup in FY 2019/20.

The Modi government’s reforms – aimed at boosting India’s manufacturing sector, attracting FDI, and reducing constraints burdening the economy – should benefit the private sector in the long-run. However, some major headwinds emerged in 2018. Non-performing assets (NPAs) in the banking system are at an all-time high of 12%, which has hindered domestic companies’ willingness to borrow money and invest, leading to sluggish private investment. Banks also remain cautious following a series of banking scandals in 2017 and 2018. Reforms aimed at cleaning up the banking system have been put into place, but dealing with NPAs will take time. Moreover, RBI could resume tightening in the second half of 2019, which will lead to higher borrowing costs, exerting further downside pressure on private investment.


Public finances to struggle amid headwinds

The fiscal deficit and public debt levels remain high. The most notable attempt at reducing these was the introduction of the GST, which aims to boost fiscal revenues and make the economy more competitive in the long term. In addition, demonetisation should improve budget revenues by reducing the weight of the informal economy. Nevertheless, fiscal consolidation efforts will be hindered by higher energy prices, as India remains a net importer of oil and subsidises this commodity. Public investment might help to offset the decline of private investment ahead of the elections in 2019, but this will also contribute to a widening of the fiscal deficit.

The current account deficit is also expected to increase. Export growth is set to slow, in line with a slowdown in global demand. Faster import growth will also play a role, with domestic consumption remaining strong, while oil prices will stabilise but remain higher than levels of the past years. Rising demand for gold after demonetisation will also play a role. For these reasons, it is expected that the rupee will continue to experience depreciatory pressure in 2019, while remaining vulnerable to a rise in global risk aversion and a faster-than-expected rate of monetary policy tightening in the United States. At the same time, foreign exchange reserves are set to remain at comfortable levels (nine months of imports in September 2018), and FDI and foreign portfolio investments are on an upward trend.


National Democratic Alliance faces some challenges

India’s ruling coalition, the National Democratic Alliance (NDA), is an alliance of several parties, of which the Bharatiya Janata Party (BJP) – the party of Prime Minister Narendra Modi – is the most important. The BJP has suffered setbacks recently, such as losing its simple majority in the lower house of Indian parliament in by-elections on May 2018. Although BJP still rules 18 out of 29 Indian states, it lost support in the 2018 state elections (Vidhan Sabhas), which does not bode well for the party ahead of the 17th Lok Sabha, or general election, scheduled to take place in April or May 2019.

Kashmir remains a source of tensions between India and Pakistan. Diplomatic talks were suspended after an attack on an Indian base in Punjab on January 2016, and relations between the two countries have deteriorated since. New tensions emerged after the Indian army shot the leader of the main insurgent movement, Sabzar Ahled Bhat, in Kashmir in May 2017. Further escalation of violence is unlikely as Pakistan and India both have an interest in preserving the status quo.


Last update : February 2018



Due to the increasingly developed banking network in India, SWIFT bank transfers are becoming more popular for both international and domestic transactions.

Standby Letters of Credit constitute a reliable means of payment, as a bank guarantees the debtor’s credit quality and repayment abilities. Confirmed Documentary Letters of Credit are also recognised, although these can be more expensive, as the debtor guarantees that a certain amount of money is available to the beneficiary via a bank.

Post-dated cheques, a valid method of payment, also act as a debt recognition title. They allow for the initiation of legal and insolvency proceedings in cases of outstanding payments.

Debt collection

Amicable phase

The practice of amicably settling trade receivables has proven to be one of the most productive solutions, as it allows the parties involved to deal with the underlying issues of the settlement in a more efficient and cost-effective manner. Average payment collection periods vary between 30 to 90 days following the establishment of contact with the debtor. Local working practices mean that debtors pay directly to the creditor, rather than to a collection agency. Indian law does not regulates late payments, or provide for a legal enforceable late payment interest rates. In practice, debtors do not pay interest on overdue amounts.

Major issues in the country currently mean that debtors are facing huge financial difficulties. The situation has deteriorated since demonetisation in November 2016 and the introduction of the GST unified tax structure (the Goods & Service Tax), in July 2017. The other main reason for payment delays is the complexity of payment procedures and approvals by banks for the restructuring plans of major players in the manufacturing sector. India is faced with a severe problem of bad loans and most of them have been declared as NPAs by the banks. This deteriorating asset quality has hit the profitability of banks and eroded their capital, thereby curbing their ability to grant much-needed loans to industries for their restructuring and revitalisation.


Legal proceedings

Indian companies have a preference for amicable recovery methods, as the country’s judicial system is both expensive and slow. There is no fixed period for court cases, while the average length is from two to four years. The statute of limitations is three years from the due date of an invoice. The statute of limitations can be extended for an additional three years, if the debtor acknowledges the debt in writing or makes partial payment of the debt.

Legal proceedings are recommended after the amicable phase, if debtor is still operating and in good financial health, is wilfully resisting payment, disputing the claim for insignificant reasons, not honouring payment plans or not providing documentary evidence.


Type of proceedings

Arbitration: Arbitration can be initiated if mentioned in the sales contract - otherwise the case can be sent to the National Company Law Tribunal (the NCLT) for registered companies.

Recovery Suits: Recovery suits tend to become a long, drawn-out battle and are usually regarded as best avoided.

National Company Law Tribunal: The NCLT was created on 1st June, 2016. It has jurisdiction over all aspects of company law concerning registered companies. Its advantages are that it can hear all company affairs in one centralised location and that it offers speedy processes (taking a maximum of 180 days). It also reduces the work load of the High Courts. The NCLT recently enacted a new Insolvency and Bankruptcy Code. Decisions of the NCLT may be appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT acts as the appellate forum and hears all appeals from the NCLT. Appeals from the NCLAT are heard by the Supreme Court of India.

Enforcement of a Legal Decision

A local judgment can be enforced either by the court that passed it, or by the court to which it is sent for execution (usually where the defendant resides or has property). Common methods of enforcement include delivery, attachment or sale of property, and appointing a receiver. Less common methods include arrest and detention in prison for a period not exceeding three months.

India is not party to any international conventions governing the recognition and enforcement of foreign judgments. However, the Indian government has entered into 11 reciprocal arrangements, and judgments from the courts of these reciprocating countries can be executed in India in the same way as local judgments. For judgments from non-reciprocating territories, a suit must be brought in India based on the foreign judgment before it can be enforced.


Insolvency proceedings

The Insolvency and Bankruptcy Code, introduced in 2016, proposes two independent stages:


Insolvency resolution process (IRP)

The IRP provides a collective mechanism for creditors to deal with distressed debtors. A financial creditor (for a financial debt), or an operational creditor (for an unpaid operational debt) can initiate an IRP against a debtor at the National Company Law Tribunal (NCLT). The Court appoints a Resolution professional to administer the IRP. The Resolution professional takes over the management of the corporate debtor and continues to operate its business. It identifies the financial creditors and holds a creditors committee. Operational creditors above a certain threshold are also allowed to attend meetings, but they do not have voting power. Each decision requires a 75% majority vote. The committee considers proposals for the revival of the debtor and must decide whether to proceed with a revival plan, or to liquidate, within 180 days.



A debtor may be put into liquidation if a 75% majority of the creditors’ committee resolves to liquidate it during the IRP, if the committee does not approve a resolution plan within 180 days, or if the NCLT rejects the resolution plan submitted on technical grounds. Upon liquidation, secured creditors can choose to realise their securities and receive proceeds from the sale of the secured assets as a priority.

Under the current Insolvency and Bankruptcy Code, the highest priority is given to insolvency resolution process and liquidation costs. Thereafter, proceeds are then allocated to employee compensation and secured creditors, followed by unsecured and government dues.

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