INDIA’S GDP GROWTH -
ECONOMY
NEWS: India’s economy is
projected to grow by 6.5% to 7.0% in the financial year ending March 2025,
falling short of the Reserve Bank of India’s forecast of 7.2%.
WHAT’S IN THE NEWS?
- Gross Domestic Product (GDP): Represents the monetary or market value
of all final goods and services produced within a country during a
specific time period.
- Purpose: Serves as an economic snapshot, estimating the size of the
economy and its growth rate.
- Key Uses:
- Tracks
national development and progress.
- Analyzes
contributions by industry or sector.
Types of GDP
- Nominal GDP:
- Valued
at current market prices without adjusting for inflation or deflation.
- Also
referred to as Current GDP.
- Real GDP:
- Inflation-adjusted
measure reflecting the actual value and quantity of goods and services.
GDP Estimation Process
- Advance Estimates (AE):
- Based
on high-frequency indicators for the first 7-8 months of the fiscal year.
- Revised Estimates (RE):
- Incorporates
the actual funds likely disbursed by the government by fiscal year-end.
- Final Estimates:
- Based
on comprehensive data collection and verification across all sectors.
India’s GDP Growth
Projections
- 2023-24 Economic Survey Projection: 6.5%
to 7.0%.
- RBI’s Projection for 2023-24: 7.2%.
- Actual Growth Rate for 2023-24: 7.6%.
- 2024-25 Projection by RBI: Revised down from 7.2% to 6.6%.
- Key Risk Factors:
- Unpredictable
weather patterns.
- Financial
market uncertainties in developed economies.
- Geopolitical
disturbances.
India’s Economic Standing
- Global Ranking: Fifth-largest economy.
- GDP Size: $3.5 trillion.
- Global GDP Contribution: Projected at over 8.0%.
- Emerging Economy: Due to low per capita income relative to
population size.
Significance of
Quarterly and Annual GDP Reports
- Quarterly GDP Data Release Schedule:
- Q1:
January-March.
- Q2:
April-June.
- Q3:
July-September.
- Q4:
October-December.
- Purpose of Quarterly Estimates:
- Provide
frequent updates on the economy’s macroeconomic situation.
- Serve
as early indicators of economic downturns.
- Allow
timely policy adjustments.
Recent Economic
Developments
- Q2 2024-25 GDP Growth Rate: 5.4% (seven-quarter low).
- Comparison:
Down from 6.7% in Q1 2024-25 and 8.1% in Q2 2023-24.
- Factors Driving Recovery:
- Festive
demand.
- Agricultural
growth and rural activity.
- Enhanced
government capital expenditure.
RBI’s Revised Forecast
for 2024-25
- Overall Projection: 6.6%.
- Quarter-wise Projections:
- Supporting Factors:
- Healthy
Kharif crop and better Rabi sowing.
- Normalization
of the industrial sector.
- Robust
growth of the services sector.
- Increased
government expenditure post-elections.
Monetary Policy and
Economic Support
- Repo Rate: Left unchanged at 6.5%.
- Cash Reserve Ratio (CRR): Reduced by 50 basis points to 4% in
December 2024, injecting additional liquidity into the banking system.
- Economist Recommendations: Suggest a possible reduction in the repo
rate to further aid growth.
Source: https://indianexpress.com/article/upsc-current-affairs/upsc-essentials/decoding-gdp-the-worlds-most-powerful-economic-indicator-9756744/