India has a GDP at market exchange rates just a little larger than Japan and the UK. But, with a much bigger population, GDP per head is the second lowest of the G20 (the African Union is lower). At PPP exchange rates its GDP per head is just under USD13,000, one seventh of the US level.
Demographics
India's population is expected to continue growing over the next 25 years, with a high (68%) and stable share in the 15-64 year age group. These demographics support India's GDP growth. We see potential growth as 6.2% p.a.
Inflation
India's inflation rate fell from 6.2% year-on-year in October 2024 to zero in October 2025. Although rising since then it is still just within the RBI's target range (4% +/- 2%). Rupee weakness and the high vulnerability to the imported oil price are the main reasons for the rise.
GDP growth
GDP growth was 7.8% in 2025 and is expected at 7% in both 2026 and 2027. Indian growth has been surprisingly strong, given its dependence on imported fuels.
Emissions
Low level of emissions per head, but continuing to rise. Little chance of net zero being achieved by 2050.
Fiscal Position
High level of government debt and still wide fiscal deficits are a concern. But the primary budget deficit (less than 2% of GDP in 2026 and subsequent years) is actually slightly narrower than the estimated debt stabilising level, meaning debt is likely to trend slightly lower as a share of GDP in the next 5 years.
External Position
Current account deficit is sustainable, set to remain at under 2% of GDP over the next four years. Net foreign liabilities are only 10% of GDP.
Money and Credit
Private sector credit growth has picked up, with the credit/GDP ratio rising from less than 90% in 2020. Broad money growth is as high as 19% year-on-year, which seems too high and suggests continued upward pressure on inflation. The policy rate was raised to 5.5% in October 2026.
Governance and Competitiveness
Corruption levels are still high (the score of 39, well below 50, indicates corruption is an impediment to growth). India itself is not seen as particularly innovative but the Indian diaspora certainly is.
Currency
The Indian rupee, recently stabilising after a period of weakness, is considerably below all PPP measures.
