{"id":322996,"date":"2025-01-10T17:05:18","date_gmt":"2025-01-10T11:35:18","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=322996"},"modified":"2025-01-10T17:05:18","modified_gmt":"2025-01-10T11:35:18","slug":"overview-of-the-gdp-growth-slowdown","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/overview-of-the-gdp-growth-slowdown\/","title":{"rendered":"Overview of the GDP Growth Slowdown"},"content":{"rendered":"

Source:<\/strong> This post on Overview of the GDP Growth Slowdown <\/strong>has been created based on article \u201cDecoding India\u2019s growth slowdown\u201d<\/strong> published in The Hindu on 10th January 2025.<\/p>\n

UPSC Syllabus-<\/strong> GS-3 -Indian Economy<\/p>\n

Context: <\/strong>The article analyzes the slowdown in India\u2019s economic growth, as reflected in the first advance estimates of GDP for 2024-25, released by the National Statistics Office (NSO). These estimates show a significant decline in both real and nominal GDP growth rates, raising concerns about the robustness of India\u2019s economic recovery post-pandemic and the sustainability of its fiscal and investment strategies.<\/p>\n

What does the NSO’s latest GDP estimate for 2024-25 indicate?<\/strong><\/h2>\n
    \n
  1. The NSO estimates India’s real GDP growth rate for 2024-25 at 6.4%, down from 8.2% in 2023-24.<\/li>\n
  2. This is lower than the 6.5%-7% projection from the Economic Survey (July 2024). Nominal GDP growth is estimated at 9.7%, below the 10.5% expected in the Union Budget.<\/li>\n<\/ol>\n

    Why are India\u2019s official GDP estimates questioned?<\/strong><\/h2>\n
      \n
    1. Experts, including the IMF, have flagged issues such as reliance on the Wholesale Price Index (WPI) as a deflator instead of the Producer Price Index (PPI).<\/li>\n
    2. This creates discrepancies in constant price GDP estimates, leading to anomalies in high-frequency economic trends.<\/li>\n
    3. For example, in 2023-24, nominal GDP growth fell from 14.2% to 9.6%, but real GDP growth rose from 7.0% to 8.2%.<\/li>\n
    4. This was due to an implausibly low GDP deflator (1.4%) despite retail inflation being 5.4%. Such discrepancies cause policy errors and confusion.<\/li>\n<\/ol>\n

      How has private investment contributed to GDP growth recently?<\/strong><\/h2>\n
        \n
      1. Despite an 8.2% real GDP growth in 2023-24, private corporate investments remained sluggish, focusing disproportionately on construction-related assets.<\/li>\n
      2. The private sector\u2019s role in capital formation continues to underperform.<\/li>\n
      3. The Union Budget counted on a corporate-led capex revival and announced schemes like the \u20b92 trillion \u2018Prime Minister\u2019s Package for Employment and Skilling.\u2019<\/li>\n
      4. However, real gross fixed capital formation growth has dropped from 9% in 2023-24 to 6.4% in 2024-25.<\/li>\n<\/ol>\n

        How has private investment fared historically?<\/strong><\/h2>\n
          \n
        1. During the UPA era (2004-2014), real private investment grew at over 10% annually, outpacing public investment (9%).<\/li>\n
        2. Under the NDA (2014-2020), private investment growth slowed to 6.3%, below public investment growth of 6.6%. Post-pandemic, there has been no significant structural shift in private corporate investment behavior.<\/li>\n<\/ol>\n

          What do supply-side data reveal about sectoral growth?<\/strong><\/h2>\n
            \n
          1. Quarterly Gross Value Added (GVA) growth has declined since 2023-24. Manufacturing, mining, construction, and services like retail trade, transport, and finance are slowing.<\/li>\n
          2. The only sector expected to grow faster in 2024-25 is public administration and defense, underscoring the role of public spending.<\/li>\n<\/ol>\n

            What is the status of the government\u2019s fiscal position?<\/strong><\/h2>\n
              \n
            1. As of November 2024, only 56% of the \u20b925.83 trillion net tax revenue target has been achieved, while non-tax revenues benefited from a \u20b92.11 trillion RBI surplus transfer. Capex spending remains below 50% of the budgeted \u20b911.11 trillion for 2024-25.<\/li>\n
            2. Slowing tax revenue growth has disrupted budgetary targets. Maintaining fiscal consolidation would require reduced public spending, further worsening the slowdown.<\/li>\n
            3. Abandoning fiscal discipline is not feasible due to high public debt and interest obligations.<\/li>\n<\/ol>\n

              What is the suggested way forward?<\/strong><\/h2>\n
                \n
              1. The government needs to rework its revenue strategy by enhancing taxation on wealth and corporate profits.<\/li>\n
              2. This would allow for increased capital expenditure and welfare spending without derailing fiscal prudence.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

                Source: This post on Overview of the GDP Growth Slowdown has been created based on article \u201cDecoding India\u2019s growth slowdown\u201d published in The Hindu on 10th January 2025. UPSC Syllabus- GS-3 -Indian Economy Context: The article analyzes the slowdown in India\u2019s economic growth, as reflected in the first advance estimates of GDP for 2024-25, released… Continue reading Overview of the GDP Growth Slowdown<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230],"tags":[216,8184,10498],"class_list":["post-322996","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","tag-gs-paper-3","tag-indian-economy","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/322996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=322996"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/322996\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=322996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=322996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=322996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}