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.
| Gross Value Added (GVA)
· It is a measure of the economic value generated by a sector, industry, or entity within a specific period. · GVA represents the difference between the value of goods and services produced by an economic unit and the cost of inputs and raw materials used in the production process. |
- 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.
