Uttar Pradesh is more developed than Telangana

The giant is changing slowly

India in context

India will replace China as the most populous country in the world within the current decade. The economy has been developing dynamically since liberalization in the early 1990s. The dependence on agriculture continues to decrease.

Economic key data of India

indicator

2019

GDP (nominal, billion US $) *

2.887

Gross value added (nominal, billion US $) *

2.605

GDP per capita (nominal, US $) *

2.154

Population (million)

1.366

Sectors: Industry should be strengthened

The value added is dominated by the service sector. India is an important center, especially for back office work in the financial sector. Public administration also plays a major role. The government has recognized for some time that a strong industry is necessary to create broad prosperity and sufficient jobs for the young and growing population. The campaign Make in India or that conjured up by Prime Minister Narendra Modi in the wake of the corona crisis Atmanirbhar Bharat (Self-sufficient India) testify to India's efforts to expand its industrial base.

Many large companies are state-owned (Public Sector Units). However, the government wants to privatize these increasingly.

Importance of the economic sectors in India (shares in percent)

Sectors

Share of gross value added 2019/20 *

Share of employees in 2019

Agriculture, forestry, fishing

14,1

42,4

Industry

30,6

25,6

Manufacturing

17,5

n / a

construction

8,0

n / a

Mining (including oil and gas production)

2,8

n / a

Energy supply (including
Water supply)

2,2

n / a

Services

55,3

32,0

Financial services and
Real estate industry

22,4

n / a

Hotel and hospitality industry,
Logistics, broadcasting

19,3

n / a

Public administration

13,7

n / a

Manufacturing: Aiming for higher productivity

The manufacturing industry is characterized by low productivity, a lack of skilled workers and a lack of competitiveness. Furthermore, the sector had to struggle with difficult access to credit even before the corona pandemic.

Government programs like Skill India should help to solve the problem of the shortage of skilled workers. The German government would like to support India in this. Most recently, on the occasion of the 5th bilateral governmental consultations in November 2019, a declaration of intent for increased cooperation in the field of vocational training was signed.

Despite all the obstacles, India's industry will be (partially) automated and digitized to a greater extent in the future. The vehicle construction clusters play a pioneering role here. The aerospace industry will also rely more on modern manufacturing processes. It has earned a worldwide reputation as a good and inexpensive manufacturing location.

The construction industry can expect positive developments. The ongoing trend towards urbanization will create demand for residential and commercial real estate. According to the United Nations, the population living in cities will increase by 54 percent between 2020 and 2040 to more than 740 million people. At the same time, cities should become more livable. The one launched in 2015 Smart City Mission was a first step by the government on the way to transforming them into modern and networked metropolises. Projects in 100 cities should be completed by 2023.

Services: New growth areas are opened up

India's IT industry is known around the world, but directly employed just over 4 million people in fiscal year 2018/19. Including business process management (Business Process Management) the sector is estimated to have a market size of US $ 177 billion (US $) and is expected to grow to US $ 250 billion by 2025.

A competitive start-up ecosystem has developed in the shadow of large and established companies. Areas such as online trading and FinTech are developing dynamically. The Indian population is considered to be open to the possibilities of modern technology, and the number of smartphone users is increasing rapidly; it has now reached 500 million, and the trend is rising.

The corona crisis has clearly shown the weaknesses in the health system. India's government only spent around US $ 30 billion on the health sector in 2017/18. This value is expected to grow to around US $ 82 billion by 2022. In addition to the public sector, the private sector also invests.

Agriculture: Liberalization of the agricultural market should boost investment

Agriculture employed a good 42 percent of the workforce in 2019, but it is contributing less and less to GDP. The sector is characterized by a low degree of mechanization and low productivity. Farmers usually only have very small plots and often work just above the subsistence level.

At the beginning of 2020 the slogan One India, One Agriculture Market adopted a reform package. From now on, farmers should be free to choose where and to whom they sell their products - across India. So far they have been government regulated when selling toAgriculture Produce Market Committees bound to their respective production site.

Regions: The country is characterized by great differences

Economically, rural and urban areas as well as the various regions of the country differ significantly from one another. States in the south and west can generate high per capita incomes through industrial centers. Parts of the country with a pronounced IT industry in the north and south as well, as well as those in which tourism plays an important role. Many regions of the predominantly agricultural north, on the other hand, are poorer on average than the rest of the country.

Development status and prospects of selected states / Union territories 2018/19 1) 2)

Share of GDP (in%)

BBIP per capita (in US $)3,4

Population (in millions)

Maharashtra

13,9

2.742

112,4

Tamil Nadu

8,8

3.076

72,1

Uttar Pradesh

8,8

984

199,8

Karnataka

8,1

3.257

61,1

Gujarat

7,9

3.216

60,3

West Bengal

6,2

1.711

91,3

Rajasthan

5,0

1.730

68,6

Andhra Pradesh

4,5

2.585

54,1

Telangana

4,5

3.236

35,2

Madhya Pradesh

4,3

1.427

72,6

Delhi5

4,1

5.752

16,8

Kerala

4,1

3.225

33,4

Haryana

3,9

3.585

25,4

Goa

0,4

6.585

1,5

For some areas of the economy, clusters have formed. The automotive industry is largely based around the Pune and Chennai regions. German companies play an important role here. There are also numerous industry players in Gujarat.

Aerospace companies have set up shop around Bengaluru. Thanks to its strong focus on IT, the region has also established itself as a center for start-ups. Many innovative start-ups have also settled around the capital New Delhi and in Maharashtra (Mumbai and Pune).

The area around Kolkata is still important for mechanical engineering, although the region has lost ground in recent years compared to clusters in Maharashtra, Karnataka and Tamil Nadu.

Chemical and petrochemical clusters are particularly found in Gujarat. The good connection to the ports there is a locational advantage.

Regional distribution of important industries in India

Branch of industry

Regions

Mining (including oil and gas production)

Assam, Goa, Gujarat, Jharkhand, Karnataka, Meghalaya, Odisha, Rajasthan

Chemical and petrochemical

Andhra Pradesh, Assam, Goa, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Sikkim, Telangana

electronics

Maharashtra, Odisha, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal

IT

Delhi, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal

Motor vehicles and parts

Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu

Mechanical engineering / machine tools

Karnataka, Maharashtra, Punjab, Tamil Nadu, Telangana, West Bengal

pharmacy

Andhra Pradesh, Assam, Goa, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Sikkim, Telangana

textiles

Andhra Pradesh, Arunachal Pradesh, Gujarat, Haryana, Kerala, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal