Factors hinder India's development

The Indian economy is a service economy. Over the past three years, 75% of its growth has come from service activities, and the situation is likely to remain the same in the short and medium term. Growth is expected to be driven by productivity gains, particularly in the banking and insurance sectors, as well as in public administration, owing to greater use of new technologies.

Nonetheless, the service sector employs less than 30% of the active population compared with the 48% working in agriculture where income levels remain very low. As a result, India's development lags well behind that of other countries in Asia. In 2014, annual income per capita stood at just $1,628. By comparison, GDP at PPP per capita in Indonesia and China was 1.8x and 2.2x respectively higher than in India. 

"To boost the country's development, it is crucial for the Indian government to expand its industry, as it is the only sector of activity that will create enough of the barely skilled or unskilled jobs that it needs today. And to do that, it is essential for the government to ease some of the constraints hampering the development of its industrial sector", suggests BNP Paribas.

One of the major barriers to industrial development affecting the country comes from its land purchase laws. The government has still not managed to get this reform through parliament 17 months after taking power because it does not hold a majority in the upper house of parliament. 

In late September, its coalition party (NDA) held just 64 out of the 245 seats. Even so, parliamentary elections will take place in six states between October 2015 and May 2016, with 22 upper-house members up for re-election. Were it to win the elections, the government would hold more votes than the UPA opposition party.