Country risk is low to moderate in India. The OECD country risk grade is 3; comparable with the Philippines, Thailand and Indonesia. This indicates a relatively low to moderate likelihood that India will be unable and/or unwilling to meet its external debt obligations—though individual private debtors can and do default.
Payment delays are an issue in India. According to the Atradius Payment Practices Barometer, the proportion of overdue domestic business to business (B2B) invoices reached 39% in 2019. This is much higher than in Australia, for example, where the ratio is 20%. But the Indian government has introduced more effective bankruptcy and insolvency laws that should make it easier for creditors to seek repayment from debtors who are in arrears.
India is ranked 63rd out of a possible 190 countries on the World Bank’s ease of doing business scorecard, improving 14 places relative to last year. Dealing with construction permits, trading across borders, protecting minority investors, getting electricity and credit are easier in India relative to most emerging Asian economies. But enforcing contracts, starting a business, paying taxes and registering property is still difficult. Prime Minister Modi aims raise India’s rank to within the top 30 economies by 2020.
The risk of expropriation in India is low to moderate. But under legislative enforcement (Enemy Property Act -1968), over 2,100 properties were seized during the wars with Pakistan and China in the 1960s. Even though India has reversed its stance on systematic expropriation, the volatile economic and geopolitical environment suggests that government interference could still occur.
India’s political risk is low to moderate. But recent escalation in tensions with Pakistan raises geopolitical and military risks. India scores above the emerging and developing Asian averages on all governance indicators, except for political stability and absence of violence.