India is no longer the fastest-growing Economy

Context

India lost its fastest-growing major economy tag in the fourth quarter of 2016-17, with GDP growth coming in at 6.1% compared with China’s 6.9%.

Data

• Data from the Ministry of Statistics on Wednesday showed GDP grew 7.1% in the financial year 2016-17, slower than the 8% registered in 2015-16.
• The GDP numbers were based on the new 2011-12 base year recently adopted for data including the Index of Industrial Production (IIP) and Wholesale Price Index (WPI).
• Gross value added (GVA) growth was 6.6% for 2016-17 and 5.6% in the fourth quarter, compared with 7.9% in 2015-16 and 8.7% in Q4 of that year.

GDP and its importance

• The gross domestic product(GDP) is one of the primary indicators used to gauge the health of a country’s economy.
• Economic production and growth – what GDP represents – has a large impact on nearly everyone within that economy.
• A significant change in GDP, whether up or down, usually has a significant effect on the stock market
• Investors worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.

Reasons for slowdown

• The numbers show a clear slowdown in GVA. Post-demonetization there has been a slowdown.
• The GDP growth rate is slightly higher (than GVA growth) because of a more than proportionate increase in indirect tax net of subsidies.

GDP

• Gross domestic product is the best way to measure a country’s economy.
• GDP is the total value of everything produced by all the people and companies in the country.
• It doesn’t matter if they are citizens or foreign-owned companies. If they are located within the country’s boundaries, the government counts their production as GDP.

Demonetization

• Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency: The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.
• Sometimes, a country completely replaces the old currency with the new currency.
• The opposite of demonetization is re-monetization, in which a form of payment is restored as legal tender.