Rising economic and geopolitical player India has become an attractive investment destination

• The economic outlook of the world’s most populous country remains strong despite structural challenges
• Low external debt, stable balance of payments and political stability under Prime Minister Narendra Modi all contribute to a good medium- to long-term political risk level
• Building India’s influence as a leader of the Global South and benefiting from global trade shifts will remain a priority in foreign policy
• Credendo is releasing this analysis just before the start of the Belgian Economic Mission to India, chaired by HRH Princess Astrid

A Credendo delegation will attend the Belgian Economic Mission to India between 1 and 8 March. Together with leading business and academic representatives, and high-level authorities, the delegation will visit New Delhi, the political heart of India, and Mumbai, its economic centre.

Real GDP growth leader among major economies

Since the end of the Covid-19 pandemic, India has returned to a fast growth path, averaging just above 7%, which is currently the highest rate among the world’s largest economies. Even though the IMF has recently forecast slightly lower real GDP growth at 6.5% for the coming years and besides short-term concerns, such as weakening consumer demand and domestic investments, the outlook remains promising for the Indian economy. It is driven by a vast domestic market, self-sufficient and export-oriented manufacturing and a business-friendly government. Another reason for India’s potential is its still-growing population. This creates additional opportunities for various sectors, from food to healthcare and industry, as well as a large advantage compared to China’s declining population.

“Belgium and India already share a strong trade relationship. India was Belgium’s 18th largest client with EUR 4.9 billion of exports and 16th largest supplier with EUR 6.5 billion of imports in 2023. This trade mission will undoubtedly foster the partnership between our two countries and offer Belgian companies a chance to learn more about the most promising innovation and investment projects in key sectors, such as healthcare, renewable energies, construction and defence”, says Nabil Jijakli, Deputy CEO of Credendo.

Sound external accounts in a politically stable landscape

India’s balance of payments is good, with a small current account deficit (1.1% of GDP expected in financial year 2024). It is supported by resilient worker remittances, diversified exports and robust investment inflows. Foreign trade and investments are key to the government’s strategy to boost future economic activity. Meanwhile, sound exports and investment inflows are positively affecting liquidity and external debt is relatively low. Additionally, India continues to enjoy political stability since Prime Minister Narendra Modi was re-elected for a third term in June 2024.

“These positive factors explain the persistently strong short-term political risk rating in category 2 and the stable and good medium- to long-term political risk rating in category 3¹”, notes Raphaël Cecchi, Senior Country and Sector Risk Analyst at Credendo.

More challenging future amid structural weaknesses

Despite the positive outlook, India faces structural weaknesses such as high public debt (expected to reach 83.4% of GDP in financial year 2024) and wide fiscal deficit (expected to stay over 7% of GDP in the coming years), elevated youth unemployment and insufficient public investment in health and education. However, public debt is primarily domestic, which reduces risks. Still, climate change and communal tensions under Modi’s Hindu-centric rule also pose risks to sustained growth and domestic stability.

Smart foreign policy in a changing world

In a shifting global order, the Indian democracy aims to lead the Global South, while balancing relations with other global powers. To do so, India cultivates good relations with the West, offering economic and security benefits, and strengthens its role as the defender of developing and emerging countries. Improved ties with China and strong relations with the USA highlight India’s strategic position. This is another reason why the world’s fastest-growing large economy is attractive to international and Belgian businesses, especially as they aim to reduce risks and diversify supply chains.

Read our full analysis here.

Spokesperson:                
Nabil Jijakli                    
Deputy CEO                    
rue Montoyerstraat 3                
1000 Brussels                    
E n.jijakli@credendo.com
M +32 478 25 11 33

Press contact:
Griet Van Gorp
Content and Press Relation Specialist
E g.vangorp@credendo.com 
M +32 473 33 20 50

¹ On a rating scale from 1 to 7, 1 being the lowest risk category.