India’s growth surprise

Source-This post on India’s growth surprise has been created based on the article “DK Joshi writes India’s growth surprise” published in “The Indian Express” on 2 March 2024.

UPSC Syllabus–GS Paper 3– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth.

News-The article discusses GDP forecast and observation of recently released household consumption expenditure data. Indian Economy Growth

What are some important statistics about Indian economy?

1) GDP growth rate– Growth rate is 7.6 per cent with the first three quarters growing at an average of 8.2 per cent, the implicit fourth-quarter growth turns out to be 5.9 per cent. In its latest monetary policy statement, the RBI had projected India’s GDP growth at 7 per cent for next year.

Reason behind this trend– There is strengthening of bank and corporate balance sheets. Further, the government has given great push to infrastructure.

2) Private consumption– It consists of Rural and urban consumption. Rural consumption was slower than urban consumption since high food inflation affects rural consumption more.

Read more- All India Household Consumption Expenditure Survey 2022-23- Explained Pointwise

What are the important findings of recently released household consumption expenditure data?

1) It shows shifts in consumption expenditure towards non-food items over time. This usually happens with rising per capita income.

2) There is a shift from cereals to processed items.

3) There is a split of national savings between the government, households and the private sector. The overall savings rate (savings/GDP) at around 30 per cent for 2022-23.

4) Household savings are 61 per cent of total savings. They are split between financial and physical savings.

Finding-It shows a sharp fall in net financial savings of households to 5.3 per cent of GDP in 2022-23 from 7.3 per cent in 2021-22.

Reason for decline of financial savings-Households have used borrowings to acquire physical assets such as houses which led to decline of financial saving.
However, during the pandemic, there was an increase in the financial savings rate while physical savings dropped.

5) Private corporate investment
This is the third important data point released by the NSO. This is the first-time comprehensive data on private corporate investments has been made available.

Findings– Private corporate investment did not show any positive sign of revival. Its share of total investments was stagnant. However, due to Production-Linked Incentive (PLI) scheme, notably in pharmaceuticals and electronics, there is an improvement in private investment.

Reforms that can be taken to improve private investment-There is a need to ensure consistency in policies and reduction in compliance cost to inspire confidence of corporate investors.

Question for practice

Highlight the recent findings of household consumption expenditure data?