Table of Contents
Introduction
The article published in the editorial section of The Hindu Newspaper talks about The slowing of India’s Economy between April to June in the fiscal year 2024-25 by analysing GDP and GVA majorly and also public spending and government expenditure.
Background Information
Difference between GDP vs GVA
Gross Value Added (GVA) and Gross Domestic Product (GDP) are both measures of economic performance, but they differ in their representation and calculation. GVA measures the value of goods and services produced in the economy, after subtracting the cost of raw materials and other inputs used in production. It provides a snapshot of how much value different sectors contribute to the economy, helping to understand the health of specific sectors and their contribution to overall economic growth.
On the other hand, GDP measures the total value of all goods and services produced within a country’s borders in a given period. It includes the total output from all sectors of the economy and is the most widely used indicator of a country’s economic performance. The most common method for calculating GDP is GVA = GVA + Taxes on Products – Subsidies on Products.
GVA is often used to analyze the performance of individual sectors, helping policymakers and analysts understand which parts of the economy are driving growth or lagging behind. GDP is used to assess the overall economic health of a country and is a key indicator for making comparisons over time or between different countries.
For example, if a factory produces cars, GVA would measure the value of the cars produced minus the cost of materials like steel, tyres, and other components. On the other hand, GDP would take this GVA and add any taxes the government charges on the sale of cars while subtracting any subsidies the government provides to car manufacturers. In summary, GVA focuses on the value created by production sectors before taxes and subsidies, while GDP gives the total economic output including these factors, making it a broader measure of economic activity.
Article Explanation.
India’s economic performance in the first quarter of 2024-25 was analyzed, focusing on key indicators like GDP growth, Gross Value Added (GVA), private consumption, and government spending. The slowdown in growth is attributed to persistent inflation, variability in the monsoon, and delays in government spending due to the election. The Reserve Bank of India (RBI) had anticipated a slightly higher growth rate of 7.1% for this period, but the actual growth fell short of this revised estimate.
GVA growth was slightly outpacing GDP growth, with GVA growing by 6.8% during the quarter. This growth is influenced by the high growth rate recorded in the previous year, providing a clearer picture of the economy’s production trends.
The government had ambitious plans to increase its capital expenditure by 17%, amounting to ₹11.11 lakh crore (11.11 trillion rupees) for the fiscal year. However, the general election disrupted these plans, causing the government to face the challenge of catching up on its spending targets in the remaining months of the fiscal year.
Private consumption, a key driver of economic growth, saw a significant rebound, reaching a six-quarter high of 7.4%. This recovery in consumer spending was partly facilitated by a decline in overall inflation rates, making goods and services more affordable for consumers. However, food prices remain elevated, posing a challenge for households and policymakers alike.
The agricultural sector showed some signs of recovery, with GVA growing by 2% in four quarters, the highest rate in four quarters. September’s rainfall could either support or harm the standing kharif (monsoon) crops. The performance of the agricultural sector in the coming weeks is critical, as it will influence food prices and overall inflation, factors closely monitored by the RBI.
RBI’s monetary policy committee has expressed concerns that if interest rates are not lowered, India’s GDP growth could be reduced by as much as 1% this year and the next. Lower interest rates can encourage borrowing and investment, stimulating economic growth, but the decision to cut rates is complex and depends on various factors, including inflation trends.
Despite the current challenges, India is still expected to achieve a growth rate of 6.5% to 7% for the fiscal year 2024-25. However, many economic experts forecast that growth could slow further to around 6.5% in 2025-26. This projected growth rate is considered inadequate to meet the country’s development needs, particularly in terms of generating sufficient employment opportunities for its rapidly growing and youthful population.
In conclusion, while India’s economy continues to grow, the pace has slowed compared to previous quarters, raising concerns about the sustainability of this growth. Key challenges include persistent inflation, variability in the monsoon, and delays in government spending due to the election. To address these challenges and ensure long-term growth, India needs to implement structural reforms that improve the efficiency of its institutions and create jobs for its young population.
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The Editorial Page of The Hindu is an essential reading for all the students aspiring for UPSC, SSC, PCS, Judiciary etc or any other competitive government exams.
This may also be useful for exams like CUET UG and CUET PG, GATE, GMAT, GRE AND CAT
To read this article in Hindi –https://bhaarat.hellostudent.co.in/
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