On the state of India’s Economy – Patchy expansion

Source: The post on the state of India’s Economy has been created based on the article “Patchy expansion” published in “The Hindu” on 2nd December 2023.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Growth.

News: The article discusses the recent data released by the NSO regarding the state of the Indian economy in Quarter 2 (2023-24).

What are India’s macroeconomic figures for Quarter 2 (2023-24) released by the NSO?

GDP Growth Rate: The latest provisional estimates of GDP for the July-August-September quarter project GDP growth rate at 7.6%.

Source: TOI.

GVA Growth Rate: Gross Value Added (GVA) across 8 broad sectors of economy registered a 7.4% expansion.

High-Growth Sectors: Double-digit expansion was seen in the manufacturing, mining and quarrying, construction and utilities sector.

Source: TOI.

Slowdown in Agriculture Sector: The agriculture, livestock, and fishing sector experienced contraction for the third consecutive quarter. It also witnessed a significant slowdown in year-on-year growth, dropping to just 1.2%. This highlights the severe financial uncertainty affecting people reliant on farming and related activities in rural areas.

Slowdown in Services Sector: The trade, hotels, transport and communication, and the financial and realty services sectors, two crucial components of the service industry, experienced a decline in growth. This suggests that the post-pandemic recovery in services might be losing momentum.

Slowdown in Private final consumption expenditure: Private consumption spending, the single-largest component of demand in the economy, is also encountering challenges. Its growth notably decelerated to 3.1%, down from 6% in the previous quarter. This is because rural demand remained affected by a below-average monsoon.

Public Spending-fuelled Growth: The recent surge in the economy can mostly be attributed to the boost provided by government spending (both in terms of consumption demand and asset-creating capital investments).

Policymakers must focus on expanding the base of growth in order to maintain the current pace as well as reduce inequality.

Question for practice:

Despite high GDP growth rates, India’s growth story has been one of non-inclusive growth. Discuss.