2. The economy is recovering but more should be done to go back to a 8% growth
rate or above:
1. Less subsidies, more investment in social and physical infrastructure and
tax reform would contribute to fiscal consolidation and boost incomes for
all
2. Structural barriers have hampered growth and job creation, especially in
the manufacturing sector
3. Parts of the banking system are vulnerable
4. More and better jobs for women would raise equity and boost growth by
over 2 percentage points
5. For most Indians, health care is poor
Main findings
3. 1. Reduce energy subsidies and increase investment in social and physical
infrastructure
2. Implement a broad national value-added tax (GST)
3. Introduce a simpler and more flexible labour law to cover more workers
4. Strengthen bank supervision and reduce bad loans
5. Extend female quotas to state and national parliaments and strengthen
the implementation of gender-related laws
6. Increase public spending on preventive and primary health care,
especially in rural areas and urban slums
Key recommendations
4. The Indian economy is turning around
The Indian economy slowed
more than many other
economies since the mid-
2011, but is recovering
faster
Investment and exports are
rebounding and should
drive growth
The manufacturing sector is
key for future growth
-10
-5
0
5
10
15
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y %
change
A. GDP growth¹
India Brazil
Indonesia China
OECD average
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y %
change B. GDP, exports and investment¹
GDP
Gross fixed capital formation
Exports of goods and services
- 10
- 5
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y % change
C. GDP at factor costs²
GDP Agriculture Manufacturing Services
1. Nominal sector share in GDP. Data for China are for year 2011.
2. For India, data are for fiscal year 2013-14.
Source: Indian Central Statistics Office, OECD calculation, and World Development Indicators database.
5. Key short-term challenges
Support the economic recovery by a sounder
macroeconomic framework:
Reduce inflation further
Cut the public deficit and debt further
Improve the business climate
Reduce bad loans
6. Inflation expectations remain high
Consumer price inflation
has long been much higher
than in other BRIICS
Inflation expectations
remain stubbornly high
Adopting the flexible
inflation-targeting
framework will help to
contain inflation
expectations and thus
support saving and
investment decisions
1. The consumer price index (CPI) inflation is shown. Year 2014 is based on the
data of the first nine months.
Source: OECD Outlook 96 database and Reserve Bank of India.
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y %
change
B. Inflation expectation and the actual CPI
inflation
Inflation expectations: Current CPI
-2
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y %
change
A. Inflation is higher than in other EMEs
and the OECD area¹
India Brazil
China Indonesia
7. Public deficit and debt are still high
Despite fiscal consolidation
at the central government,
the public debt and debt are
high
Public spending efficiency
and targeting should be
improved. Subsidy reforms
and the implementation of
the unique identification
number (Aadhaar) are key.
India also needs to raise
more revenue in a less
distortive way –
implementing the GST is
essential
Source: Brazilian Ministry of Economics, CEIC, Chinese Ministry of Finance, IMF,
OECD Analytical database, OECD Economic Outlook 96 database and World Bank.
0
1
2
3
4
5
6
7
8
9
10
11
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
% of GDP A. Recent developments in India
States' fiscal deficit Central government's fiscal deficit
0
20
40
60
80
100
120
0
20
40
60
80
100
120
CHL CHN IDN TUR ZAF MEX BRA IND OECD
% of GDP% of GDP B. General government debt in emerging countries, 2013 or latest year available
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
MEX CHN TUR IDN BRA CHL ZAF OECD IND
% of GDP% of GDP C. General government deficit in emerging countries, year 2013 or latest year
8. External vulnerability is a less immediate
concern
The current account deficit
has narrowed
Gross foreign liabilities are
low, though dominated by
debt with a short-term
component
Net FDI is lower than in the
late 2000s
Competitiveness has
deteriorated, threatening
exports
1. Real effective exchange rate (REER) based on consumer prices. An increase implies a loss of competitiveness.
2. Or latest available figures.
Source: India Ministry of Commerce and Trade, Reserve Bank of India, OECD - International trade and balance of payments
database, OECD - National accounts database, Bank for International Settlements and IMF Balance of Payments Statistics.
-2
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010 2011 2012 2013 2014
% of GDP
A. The current account deficit has recently
narrowed
Current account deficit
Trade deficit
Net FDI
0
20
40
60
80
100
120
POL ZAF MEX TUR BRA RUS IDN CHN IND
% of GDP
B. Gross foreign liabilities are low
2013² 2007
0
10
20
30
40
50
60
70
80
TUR IND POL MEX RUS IDN CHN BRA ZAF
%
C. Debt accounts for a large share of
gross foreign liabilities
2013² 2007
0.01
0.012
0.014
0.016
0.018
0.02
0.022
0.024
0.026
0.028
75
80
85
90
95
100
105
USD for
Rupee
(2010 =
100)
D. Competitiveness has deteriorated
Competitiveness indicator, (REER)¹
2000-08 REER average
Nominal exchange rate (RHS)
9. Banks are in poor shape and the private
bond market is too small
1. In percentage of gross advances. The NPL ratio is the ratio between the value of
non-performing loans (NPL) and the total value of the loan portfolio.
2. The Capital to risk-weighted assets ratio (CRAR) is equal to the capital of the bank
divided by aggregated assets weighted for credit risk, market risk and operational
risk.
Source: IMF Financial Soundness Indicators database and Reserve Bank of India.
The banking sector is
dominated by public banks.
They are the least profitable
and hold majority of
distressed assets.
The steady rise of distressed
assets is a concern.
Banks and financial
institutions are required to
invest a significant share of
their financial holdings in
government securities.
The corporate bond market
cannot meet long-term
financing needs.
0
1
2
3
4
5
6
7
8
9
10
0
5
10
15
20
25
India
Brazil
China
SouthAfrica
Philippines
Malaysia
Turkey
Colombia
Indonesia
Argentina
%%
A. Soundness and profitability are low
2014 Q2 or latest available data
Regulatory capital to risk-weighted assets
Return on assets (RHS)
0
2
4
6
8
10
12
14
16
Total Public sector Private sector Foreign
%
B. Distressed assets are concentrated in
public sector banks¹, March 2014
Gross non-performing assets
Restructured loans
0.0
0.5
1.0
1.5
2.0
0
5
10
15
20
Public sector Private sector Foreign
%%
C. Public sector banks are
underperforming, March 2013
Capital assets ratio (LHS)²
Return on assets (RHS)
0
5
10
15
20
25
30
35
40
45
Indonesia
India
South
Africa
Brazil
China
Russia
% of GDP
D. Bond market capitalisation (2011)
Private bond market
Public bond market
10. Longer-term challenges
Reduce barriers to the growth of the
manufacturing sector to create more and better
jobs
Use more effective and better targeted social
spending to make growth more inclusive
Increase economic opportunities for women
11. A jobless growth so far … while more people
will enter the labour force
Employment creation has
not kept up with the
growing working age
population and has
benefitted mostly men
Demographics will favour
labour force growth up to
the 2040s
More than 100 million
people may enter the labour
force between 2010 and
2020, mainly a young and
more educated cohort
An increase in the very low
female labour force
participation would also
raise the supply of workers
1. According to the ILO definition, working age population is made of individuals aged 15 or more.
2. The age dependency ratio is the ratio of the population younger than 15 or older than 64 to the
working-age population, which is those aged 15-64. From 2015 World Bank projections are shown.
3.The labour force participation of women is equal to the percentage of working women aged 15-64 over
the overall female population aged 15-64. Data refer to the simple average of the dependency ratio for
each period.
Source: ILO (2013), Key Indicators of the Labour Market (KILM) database, OECD (2014) Perspectives
on Global Development and World Bank WDI databank.
50
51
52
53
54
55
56
57
58
59
60
50
51
52
53
54
55
56
57
58
59
60
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%% A. Employment creation has not kept up with the growing working age population
Ratio of employment to working age population¹
0
10
20
30
40
50
60
70
80
90
100
IND BRA CHN IDN MEX RUS ZAF OECD
B. The dependency ratio is projected to
decline up to the 2040s²
1991-2050
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
IND BRA CHN IDN MEX RUS ZAF OECD
C. The labour force participation of
women is low³
1991-1995 1996-2000
2001-2005 2006-2012
12. Manufacturing has created few and low
quality jobs
Net job creation in the
manufacturing sector has
been poor
Most new jobs are with
firms with more than 10
employees and with
temporary contracts and no
social security benefits
1. Employment is based on usual principal and subsidiary status.
2. Informal workers are those with no social security benefits (Mehrotra et al., 2014).
Source: OECD Labour market statistics, NSSO, Employment and unemployment survey, rounds no. 61 and 68; and
Mehrotra et al. (2014).
-40
-30
-20
-10
0
10
20
30
Agriculture Construction Manufacturing Services and white-collar Total
Change in millions A. Employment creation¹ in the manufacturing sector has been low, 2005-12
-1
0
1
2
3
4
5
6
Formal Informal Total Formal Informal Total
Change in millions B. Most manufacturing jobs created over the period 2005-12 were informal²
Organised Unorganised
13. Manufacturing has not contributed much to
the growth of GDP and exports
Productivity in the
manufacturing sector tends
to be low, reflecting the
small size of firms
Manufacturing has
contributed little to GDP
growth
1. The productivity is measured by gross value added at basic
prices divided by the number of hours worked. This measure
is then converted in current USD using the PPP conversion
factor for GDP.
2. The productivity of labour is measured in terms of value
added per worker. Value added is measured in rupees.
Source: World Input Output Database and Worldbank WDI
database; ASI 2010-2011 Summary results for the Organised
sector, Key Results of Survey on Unincorporated Non-
agricultural Enterprises (excluding construction) in India
(2010-2011) Indian Central Statistics Office; OECD
calculation.
0
5
10
15
20
25
30
35
IND CHN BRA MEX RUS TUR IDN
USD PPP A. Value added per hour worked¹, 2009
Manufacturing Services
0
200
400
600
800
1 000
1 200
1 400
Unorganised
sector
0-14
15-19
20-29
30-49
50-99
100-199
200-499
500-999
1000-1999
2000-4999
5000+
Organised
sector
Value added per worker
Number of employees
B. Productivity is low in smaller firms²
0
10
20
30
40
50
60
70
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-…
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
%
C. Indian manufacturing has not risen as a share of GDP
Sectoral decomposition of GDP
Agriculture Manufacturing Industry non manufacturing Services
20
40
60
80
100
120
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
% D. Manufacturing exports in total merchandise exports
Brazil China India South Africa
14. There are barriers to manufacturing growth
Labour regulations become
relatively stringent and
costly to comply with when
firms grow
The quality of infrastructure
is below par
Taxes are complex and
costly to comply with
The business environment
is cumbersome and the
outdated bankruptcy law
makes it difficult to
reallocate capital to most
productive activities
Source: OECD Employment Protection Database,
2013 update; World Bank Online Database; PWC
Paying Taxes, 2014 Report; World Bank Doing
Business database.
0
1
2
3
4
5
6
USA
CAN
GBR
NZL
HUN
CHE
IRL
AUS
JPN
EST
SVK
MEX
ESP
OECD
ISL
GRC
BEL
DNK
AUT
POL
EU
TUR
NOR
LUX
KOR
ISR
FIN
SVN
ITA
SWE
CHL
FRA
DEU
NLD
CZE
PRT
BRA
ZAF
RUS
CHN
IND
IDN
A. Employment protection legislation is highly restrictive, 2013
0
10
20
30
India Brazil Mexico Indonesia South Africa World Chile OECD China Korea
In % of the output
B. Electric Power Transmission and Distribution (T&D) losses
1990 2000 2010 2011
0
100
200
300
400
500
United
Kingdom
Canada
France
UnitedStates
Russia
SouthAfrica
Colombia
Germany
Indonesia
Italy
Japan
China
Argentina
Brazil²
Hours per year C. Time to comply with taxes for small and medium-sized enterprises
Consumption tax Labour tax Corporate income tax
736
490
1374
India
OECD
ARG
AUS
AUTBEL
BRA
CAN
CHL
CHN
COL
CZE
DNK
EST
FIN
FRA
DEU
GRCHUN
ISL
IND
IDN
IRL
ISRITA
JPN
KOR
LUX
MEX
NLD
NZL
NOR
POL
PRT
RUS
SVK
SVN
ZAF
ESP SWE
CHE
TUR
GBR
USA
0
20
40
60
80
100
0 1 2 3 4 5
Recovery rate (cents on
the dollar)
Time (years)
D. There is scope to improve the insolvency legislation and debt-recovery rates
15. Women’s economic participation is low
• Gap with men is over
50%
• Regional differences
are large – more
women work in the
southern states
• More than half of
working women are
paid or unpaid self-
employed
• Women wages are
often half on men’s at
similar education
levels
Notice: Data refer to working age population (15 to 64 years). The gap is male minus female participation rate.
Source: ILO, Economically Active Population, Estimates and Projections (6th edition, October 2011); and NSSO,
Employment and Unemployment Survey, Rounds no. 43, 50, 55, 61, 66 and 68.
0
10
20
30
40
50
60
70
Illiterate Literate Primary Middle Secondary Graduate
%
B. LFPR by education - urban
2000 2005 2010 2012
0
10
20
30
40
50
60
70
Illiterate Literate Primary Middle Secondary Graduate
% C. LFPR by education - rural
2000 2005 2010 2012
0
10
20
30
40
50
60
RUS CHN OECD average ZAF BRA IDN IND
% A. Gap in male-female labour force participation rate
16. Low participation reflects complex factors
• Social status of
staying home
• Discriminatory labour
laws
• Weak implementation
of gender-related laws
• Bias in inheritance
laws affects access to
collateral
• Jobless growth
1. Data refer to working age population (15
to 64 years).
Source: OECD, Gender, Institutions and
Development Database 2012; and NSSO,
Employment and unemployment survey,
rounds no. 55, 61, 66 and 68.
Net increase in…. 2000 2012 Change 2000-12
Working age population 304 403 99
Labour force
Employment 123 129 6
Unemployment 2 3 1
Remaining outside labour force
In education 18 42 24
Not in education 161 229 68
Working age population 326 427 101
Labour force
Employment 274 343 69
Unemployment 7 8 1
Remaining outside labour force
In education 32 61 29
Not in education 13 15 2
Unemployment rate by education¹
Employment trends
Millions, 15-64 years of age
Female
Male
0
5
10
15
20
25
30
35
Illiterate
Literate
Primary
Middle
Secondary
Graduate
%
B. Urban female
2000 2005 2010 2012
0
5
10
15
20
25
30
35
Illiterate
Literate
Primary
Middle
Secondary
Graduate
%
C. Rural female
2000 2005 2010 2012
0
0.2
0.4
0.6
0.8
1
Discriminatory Family Code
Restricted Physical Integrity
Son Bias
Restricted Resources and
Entitlements
Restricted Civil Liberties
A. Social institutions and gender index (SIGI)
Brazil
China
India
South Africa
17. Health and well-being can be vastly improved
Health outcomes have
improved but remain below
par
Poor living conditions –
including low access to
sanitation – play a role
Public resources invested in
health care are limited,
unequally spread, and
quality is often an issue
1. Nearest available year.
Source: OECD (2014), Health Database;
World Bank (2014), World Development
Indicators Database; and WHO (2014),
Public Health and Environment
Database.
83.2
82.5
82.1
82.1
81.5
81.3
81.0
81.0
81.0
80.7
80.2
78.9
78.7
76.5
75.6
75.2
75.2
74.8
74.6
74.4
74.2
74.1
73.7
70.7
70.3
70.2
66.4
66.3
56.1
0
20
40
60
80
100
120
Japan
Spain
Australia
France
Canada
Korea
Germany
Ireland
United…
Greece
OECD
Chile
UnitedStates
Estonia
VietNam
China
Hungary
Malaysia
Turkey
Mexico
Thailand
SriLanka
Brazil
Indonesia
Bangladesh
RussianFed.
Pakistan
India
SouthAfrica
A. Life expectancy at birth
2012 ¹ 1970 ¹
0
10
20
30
40
50
60
70
1990 1995 2000 2005 2010
%
B. Rural population with access to improved sanitation
China India
Indonesia South Africa
Brazil
0
2
4
6
8
10
12
RussianFed.
Germany
Australia
OECD
France
United…
Canada
UnitedStates
Japan
Mexico
Korea
Brazil
Chile
Turkey
China
Malaysia
VietNam
Philippines
Pakistan
SouthAfrica
India
SriLanka
Myanmar
Thailand
Bangladesh
Indonesia
Cambodia
Per 1 000 persons
C. Number of doctors and nurses
2012 or latest year available
Doctors Nurses
18. More information…
Compare your country
data visualization tool
OECD Economic Surveys: India 2014
• Read this publication
• Website with additional information
www.oecd.org/eco/surveys/economic-survey-india.htm
OECD
OECD Economics
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without
prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.
19. Key recommendations to strengthen the
monetary and fiscal policy frameworks
• Implement flexible inflation targeting
• Pursue fiscal consolidation while avoiding
one-off measures and cuts in growth-
enhancing spending
• Shift public spending away from energy
subsidies towards investment in physical
and social infrastructure.
• Implement a national value-added tax
(GST) with only limited exemptions
20. Recommendations to raise the
effectiveness of the financial sector
• Strengthen bank supervision by early recognition of
asset deterioration and stricter provisioning standards
• Wind down bank lending obligations to priority
sectors and gradually reduce the proportion of
government bonds required to be held by banks and
institutional investors (statutory liquidity ratio)
• Further ease restrictions on bond market investments
by foreign institutional investors
• In promoting financial inclusion, rely further on
mobile banking and branching through local
businesses, allow MFIs to take deposits
21. Key recommendations to improve
labour market performance
• Reduce barriers to formal employment by
introducing a simpler and more flexible
labour law which does not discriminate by
size of enterprise
• Continue improving access to education,
especially at the secondary level, and
better focus on the quality of education at
all levels. Provide better and earlier
vocational training
22. Recommendations to improve the
quality of infrastructure
• Impose clear timelines, rationalise
documentation, and implement single-
window clearance
• Improve the land registry. Assess and
amend as needed the new land acquisition
law. The government should review the
timelines within the Bill and aim to make
land acquisition faster
23. Recommendations to improve the
business environment
• Continue improving the business
environment and opening up the economy
• Strengthen governance of state-owned
enterprises, and reduce public ownership
over time
• Further simplify regulations and reduce
administrative burdens on firms.
Introduce a modern bankruptcy law
24. Key recommendations to increase
female economic participation
• Extend female quotas to state and national
parliaments
• Further modernise labour laws to ensure
equal work opportunities for women
• Enhance the implementation of gender-
related laws
• Expand secondary and higher education
for women and skills training for female
entrepreneurs
25. Key recommendations to improve
health outcomes for all
• Increase public spending on health care with
particular focus on preventive and primary
care, especially in rural areas and urban
slums
• Expand the number of health professionals
and up-skill professionals located in rural
areas
• Strengthen the management of public health
care facilities and ensure that private
facilities and their employees meet minimum
quality standards
