Why is it in the news?

• India’s economic landscape is set to witness a growth trajectory, with the National Statistical Office (NSO) estimating the real GDP growth for the fiscal year 2023-24 at 7.3%, a marginal uptick from the previous year’s 7.2%.

Key Highlights

• Farm Sector: The Gross Value Added (GVA) growth for the farm sector is expected to decrease significantly from 4% to 1.8%, indicating challenges in the agricultural domain.

• Trade, Hotels, Transport, Communication, and Services: GVA uptick in this sector is anticipated to moderate to 6.3% from a robust 14% in the preceding year.
• Manufacturing and Mining: Manufacturing GVA growth is projected to accelerate to 6.5%, a noteworthy improvement from the modest 1.3% in the previous year. Mining GVA is also expected to rise to 8.1%, compared to 4.6% in 2022-23.
• Private Consumption Expenditure: The share of private final consumption expenditure in GDP is anticipated to drop to 56.9%, marking the lowest in at least three years.
• Investment Rate: The investment rate is poised to increase to nearly 30% of GDP, driven by government capital expenditure. However, higher consumption growth is deemed vital for private investments to play a significant role in spurring the economy.

About GDP

• Nominal GDP: Estimated to reach $3.5 trillion in 2024 and $7.3 trillion by 2030 (IMF), representing the total market value of all final goods and services produced within the country’s borders, measured in current prices.
• Real GDP: Adjusted for inflation, providing a more accurate reflection of the actual volume of goods and services produced. Real GDP growth is critical for understanding genuine economic expansion.
• Potential GDP: The maximum sustainable output an economy can achieve, offering insights into resource utilization and room for improvement.

Challenges to GDP Growth

• Global Headwinds: Challenges such as slowing global growth, rising interest rates, and geopolitical tensions may impact foreign investment and trade, affecting export-oriented sectors.
• Domestic Impediments: Infrastructure bottlenecks, bureaucratic hurdles, and skill shortages pose obstacles to efficient production and investment.
• Rural Distress: Low agricultural income and slow job creation in rural areas contribute to lower aggregate demand, hampering overall economic expansion.
• Financial Sector Woes: Stressed assets in the banking system limit credit availability, affecting both investment and consumption.
• Environmental Concerns: Balancing economic growth with environmental sustainability is a critical consideration, requiring responsible resource utilization and pollution control.

Measures to Address Challenges

• Boosting Infrastructure Investment: Strategic investments in railways, highways, ports, and digital infrastructure to improve connectivity, reduce logistics costs, and attract investment.
• Ease of Doing Business: Streamlining regulatory processes, reducing bureaucratic red tape, and enhancing transparency to incentivize investment and boost private sector participation.
• Skill Development and Education: Prioritizing education, skilling initiatives, and vocational training to equip the workforce with relevant skills, driving productivity and innovation.
• Revitalizing Agriculture: Improving irrigation facilities, providing technical assistance, and fostering agri-tech innovation to enhance agricultural productivity and income for farmers.
• Financial Sector Reforms: Strengthening banks, resolving bad loans, and promoting financial inclusion to improve credit flow and support economic growth.