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Country Risk: India

Flag of India

Official Name: Republic of India

Internet Domain: .in
International Dialing Code: +91

Table of Contents

Location and Size Credit and Collections
Government Risk Assessment
Legal System Business Climate
Interesting Facts Business Protocol
 Economy Other Sources of Information

Location and Size

India is located in Southern Asia, bordering the Arabian Sea and the Bay of Bengal, between Burma and Pakistan. Its total area is 3,287,263 sq km, slightly more than one-third the size of the U.S., making it the 7th largest country in the world.


India is the world’s largest democracy. It is considered a Federal Republic and is made up of 29 states and 7 union territories. Below are the branches of government


  • Chief of State: President Ram Nath KOVIND; Vice President M. Venkiaiah NAIDU
  • Head of Government: Prime Minister Nerendra MODI
  • Cabinet: Appointed by the president on the recommendation of the prime minister

Legislative: Bicameral Parliament consisting of the Council of States and the People’s Assembly

Judicial: Supreme Court (one chief justice and 25 associate justices are appointed by the president and remain in office until they reach the age of 65 or are removed for “proved misbehavior”)

Legal System

India’s legal system is based on English common law. The judiciary reviews legislative acts and there are separate personal law codes that apply to Christians, Hindus and Muslims. The Indian judicial system is divided into District Courts, High Courts and Supreme Court.

India has accepted compulsory International Court of Justice (ICJ) jurisdiction with reservations. (What does this mean?)

Interesting Facts About India

From the U.S. Department of Commerce

  • Second fastest growing economy in Asia, after China
  • One of only three countries that builds its own supercomputers
  • Fourth largest economy in the world (measured in purchasing power parity)
  • One of just six countries that launches its own satellites
  • 100 of the Fortune 500 have R&D facilities in India
  • Second largest group of software developers in the world, after the U.S.
  • Lists 6,600 companies on the Bombay Stock Exchange (only the New York Stock Exchange has more companies listed)
  • World’s largest producer of milk; second largest producer of food, including fruits and vegetables.
  • World’s second largest pharmaceutical industry, after China

Map of India

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India’s economic growth slowed in 2011 because of a decline in investment caused by high interest rates, rising inflation, and investor pessimism about the government’s commitment to further economic reforms and about slow world growth. Investors’ perceptions of India improved in early 2014, due to a reduction of the current account deficit and expectations of post-election economic reform, resulting in a surge of inbound capital flows and stabilization of the rupee. Growth rebounded in 2014 through 2016. Despite a high growth rate compared to the rest of the world, India’s government-owned banks faced mounting bad debt, resulting in low credit growth. Rising macroeconomic imbalances in India and improving economic conditions in Western countries led investors to shift capital away from India, prompting a sharp depreciation of the rupee through 2016.

The economy slowed again in 2017, due to shocks of “demonetizaton” in 2016 and introduction of GST in 2017. Since the election, the government has passed an important goods and services tax bill and raised foreign direct investment caps in some sectors, but most economic reforms have focused on administrative and governance changes, largely because the ruling party remains a minority in India’s upper house of Parliament, which must approve most bills.

India is the second fastest growing market in Asia after China.

Leading Markets (2017): US 15.6%, UAE 10.2%, Hong Kong 4.9%, China 4.3%

Leading Exports – Commodities: Petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel

Leading Suppliers (2017): China 16.3%, US 5.5%, UAE 5.2%, Saudi Arabia 4.8%, Switzerland 4.7%

Leading Imports – Commodities: Crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals

Top Industries: Textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, pharmaceuticals

Top Agricultural Products: Rice, wheat, oil seed, cotton, jute, tea, sugarcane, lentils, onions, potatoes; dairy products, sheep, goats, poultry; fish

Comparative Economic Indicators – 2018

India Pakistan Bangladesh Sri Lanka China USA
(USD millions)
1,326.09 207.86 159.45 22.57 1,384.68 329.25
Population growth rate * (%) 1.10 1.41 1.02 0.73 0.37 0.8
Literacy (%) 74.4 57.9 72.8 92.6 96.4 99.0
Unemployment rate (%) 8.5 6.0 4.4 4.4 3.9 4.4
Inflation (%) 3.6 4.1 5.6 6.5 1.6 2.1
Population below poverty line (%) 21.9 29.5 24.3 6.7 3.3 15.1
GDP** (USD billions) 9,472.0 1,061.0 690.3 275.8 23,210.0 19,490.0
GDP real growth rate (%) 6.7 5.4 7.4 3.3 6.9 2.2
GDP per capita** (USD) 7,200 5,400 4,200 12,900 16,700 58,900
Public debt (% of GDP) 71.2 67.0 33.1 6.7 47.0 78.8
Exports (USD billions) 304.1 32.88 35.3 11.36 2,216.0 1,553.0
Imports (USD billions) 452.2 53.11 47.56 20.98 1,740.0 2,361.0
Currency Rupee
Yuan Renminbi
Exchange rates (per USD) 2013 68.85 163.12 84.49 176.08 6.88 n/a
Exchange rates per (EUR) 77.76 184.23 95.41 198.84 7.77 1.13

Data from CIA World Factbook
*April, 2017 estimates
**PPP – Purchasing Power Parity

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Credit and Collections

India’s legal system is complex and procedures are time consuming. Corruption is always a factor that creditors have to take into account.

Contractual Interest: The Indian legal system allows for contractual interest up to 14% on a case-by-case basis. In litigation cases, however, the amount of interest awarded is left to the discretion of the court.

Statute of Limitations: Three years for commercial invoices as well as for bills of exchange and promissory notes.

Dispute Resolution

According to the World Bank, India is the 6th slowest country in the world in the number of days it takes to resolve a dispute.

It takes about seven years to liquidate a business in India. Foreign awards are enforceable under multilateral conventions such as the Geneva Convention. The International Center for Alternative Dispute Resolution (ICADR) has been established as an autonomous organization under the Ministry of Law, Justice, and Company Affairs to promote settlement of domestic and international disputes through alternative dispute resolution.

Summary Action: The objective underlying the summary procedure is the prevention of unreasonable obstructions by a defendant who has no defense. A summary action can be initiated, if the creditor has bills of exchange or promissory notes. The debtor is not automatically entitled to defend the suit, but must ask the court permission to defend. Permission to defend is only granted if the affidavit filed by the debtor discloses facts deemed by the court as sufficient for granting such permission. The expected time frame for a Summary Action is one year. Enforcement of judgments is carried out on all movable or immovable assets, provided they have been identified, located previously, and they are free of encumbrances.

Ordinary Suit: An extremely time-consuming procedure in which the creditor faces obstacles like remedies, adjournments, and corruption. It is not advisable to start legal actions if the creditor does not have a strong case with unequivocal documents and evidence. Instead, the creditor should try to obtain an out of Court settlement as ordinary actions often conclude with no concrete results. When documents are submitted, the creditor will be required to be present for cross-examination before the Court determines whether the documents are admissible.

Insolvency Proceedings

There are four main types of insolvency in Indian commercial law:

  1. Compulsory Liquidation: Can be filed by the debtor, a creditor, and any person authorized by the central government upon a report of an inspector. The process is extremely lengthy.
  2. Voluntary Liquidation: Proceedings are slow and can last several years. The dividend prospects for unsecured creditors is generally very poor.
  3. Receivorship: a debenture holder may appoint a receiver. On his appointment, the assets of the company are held in favor of the debenture holder and the company can no longer utilize them in its normal course of business. Creditor claims are logged, but the aim of this procedure is to satisfy the debenture holder, either by continuing the company’s activities or by selling assets to a third party. Any remaining dividend after satisfaction of the debenture holder is distributed to the unsecured creditors, but most often little is left over.
  4. Sick Industrial Companies Act (SICA): Enacted in order to prevent sick or potentially sick companies from going under. All legal proceedings against a SICA company are suspended, including winding up proceedings. A body of experts, the Board for Industrial & Financial Reconstruction, adopts measures to restructure capital, sell surplus assets, secure proper management, sell/lease units to other firms. This process is extremely slow, averaging 6-7 years.

Risk Assessment

According to Coface,  Real GDP growth was slower than expected for the 2018/19 financial year (FY), reaching its slowest pace in five years. With growth slowing to 5.8% YOY in Q1 of 2019 (Q4 of FY 2018/19), the official target of 6.2% growth for FY 2020 remains challenging.

Finally, Slower domestic consumption (60% of GDP) dragged on  growth. Household consumption continues to struggle from the residual impact of demonetisation (withdrawal of the 500 and 1000 rupee notes) and the introduction of a harmonised goods and services tax (GST), as their influence over the informal sector remains significant, although difficult to quantify. Tighter credit conditions led to weaker private investment. The decline in investment has translated into fewer jobs, with unemployment levels reaching a 45-year high of 6.1% in 2019.


Coface Country Rating: B — India will likely overshoot the fiscal deficit target to 3.3% of GDP in FY20. This is especially the case as revenues from the GST have been disappointing, both in terms of weaker domestic consumption but also due to problems with collection.

Coface Business Climate Rating: B — A somewhat shaky political and economic outlook and a relatively volatile business environment can affect corporate payment behavior. Corporate default probability is still acceptable on average.

Credendo Political Risk: 2.5 (Low based on a scale of 1-lowest risk to 10-highest risk)

Credendo Commercial Risk: B (Moderate risk based on A-low risk to C-high risk)

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Business Climate

Thanks to its vast pool of highly skilled labor and the stable political climate, India is one of the most attractive investment places in the world. It has liberalized the economy during the last 25 years and the government has a business-friendly policy.

The Indian market, with its 1.2+ billion population, presents lucrative and diverse opportunities for exporters with the right products, services, and commitment. India requires equipment and services for major sectors such as energy, environmental, healthcare, high-tech, infrastructure, transportation, and defense. This need will exceed tens of billions of dollars in the mid-term as the Indian economy further globalizes and expands.

Performance Requirements and Incentives: Local sourcing is generally not required, but has been mandated for certain sectors in the past. In some consumer goods industries, the Indian government requires the foreign party to ensure that the inflow of foreign exchange and foreign equity covers the foreign exchange requirement for imported goods.

Intellectual Property Rights: India has generally adequate copyright laws, but enforcement is weak and piracy of copyrighted materials is widespread. Trademark protection is good and meets international standards. However, Indian law provides no protection for trade secrets.

Right to Private Ownership (by foreign companies): Subject to certain sector-specific restrictions, foreign and domestic private entities may establish and own businesses in trading companies, subsidiaries, joint ventures, branch offices, project offices and liaison offices. The Government of India does not permit investment in real estate by foreign investors, except for company property used to do business and for the development of most types of new commercial and residential properties.

Conversion and Transfer Policies: The Indian rupee is fully convertible for current account transactions, which are regulated under the Foreign Exchange Management Rules, 2000. Prior Reserve Bank of India approval is required for acquiring foreign currency above certain limits for specific purposes (foreign travel, consulting services, and foreign studies). Capital account transactions are open for foreign investors, subject to various clearances. The Indian government has taken additional steps to relax foreign exchange and capital account controls for Indian companies and individuals.

Economic Freedom: India’s economic freedom score is 55.2, making its economy the 129th freest in The Heritage Foundation’s 2019 Index of Economic Freedom. Its score is 0.7 point higher than last year reflecting modest improvements in six of the 10 economic freedoms including trade freedom and fiscal freedom. India is ranked 31st out of 43 countries in the Asia-Pacific region, and its overall score in below the regional and world averages.

Corruption: According to the Business Anti-Corruption Portal: “The business climate in India is hampered by a cumbersome bureaucracy and corruption at all levels of government. The political system is characterized by patronage systems and public officials have vested interests in their positions. Corporate integrity is also very low, as scandals regularly highlight Indian companies’ payment of kickbacks both when operating domestically and internationally. The federal structure of the Indian government results in huge differences in the levels of corruption in each state.”

Transparency International, in its 2019 Corruption Perceptions Index, ranked India 80th out of 180 countries.

For more detailed information on these topics, visit the 2019 Investment Climate Statement ” India, of the U.S. Department of State.

Business Protocol in India

In general, Indians prefer to do business with people they know, as relations are built on mutual trust and respect.

There are numerous official (recognized by the central government) and unofficial Indian languages. Hindi is the “official” language and is the most widely spoken (41% of the population). However, English has the status of “subsidiary official” language. Most commercial communication (within India and with other countries) is done in English.

More information on Business Protocol: Kwintessential

Sources for further information on doing business in India

American Chamber of Commerce in India

Doing Business in India, Trade Chakra

Doing Business in India, U.S. Commercial Service

Embassy of India, Washington, DC

Embassy of the United States, India

Indo-American Chamber of Commerce


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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 150 countries including India. For further information, contact [email protected].

This report represents a compilation of information from a wide variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Coface Country Rating and  Credendo.

Exchange Rates: The Currency Site.

Other information is provided by sites including FITA.