India, 7% Plus Annual Growth, and the Realities
For Mains
Why India’s growth is not as high as projected
- Compared to the pre-COVID-19 GDP level of ₹35.5 lakh crore in 1Q of 2019-20, real GDP at ₹36.9 lakh crore in 2022-23 shows an increase of only 3.8%.
- The National Statistical Office’s real GDP growth estimate of 13.5% for the first quarter of 2022-23 is 2.7% points lower than the Reserve Bank of India’s earlier assessment of 16.2%.
Sector wise analysis
- Out of the eight Gross Value Added (GVA) sectors, the first quarter growth performance is higher than the national average (12.7%), in public administration, defence and other services (26.3%), trade, hotels, transport et al. (25.7%), construction (16.8%), and electricity, gas, water supply et al. (14.7%).
- Growth in manufacturing, at 4.8%, however, is much below the overall average.
- However, the data is much different if you consider the pre-COVID-19 era, that is in 1Q of 2019-20.
- One can see that manufacturing has done better with an increase of 7% in 1Q of 2022-23 while the trade, hotels, transport et al. sector still remains below its pre-COVID-19 level by a margin of minus 15.5%.
- Recovery in domestic demand is visible through the growth rates of private final consumption expenditure (PFCE), at 25.9%, and gross fixed capital formation (GFCF) at 20.1% over the corresponding quarter of the previous year.
- The ratio of Gross Fixed Capital Formation (GFCF) to GDP at current prices is 29.2% in 1Q of 2022-23 which is 1% point higher than the investment rate of 28.2% in the corresponding quarter of the previous year.
- The contribution of net exports to real GDP growth is negative at minus 6.2% points in 1Q of 2022-23 since growth of import continues to exceed growth of export by a visible margin.
- Headline manufacturing Purchasing Manager’s Index (PMI) was at an eight-month high of 56.4 in July 2022. It remained high at 56.2 in August 2022. PMI services were at 55.5 in July 2022, which indicated 12 consecutive months of expansion.
- Gross Goods and Services Tax collections have remained high at ₹1.49 lakh crore and ₹1.43 lakh crore in July and August 2022, respectively.
What needs to be done
- Two important areas of policy support for this purpose would be to further increase the investment rate and to reduce the magnitude of negative contribution of net exports.
- The Centre’s capital expenditure grew by 62.5% during the first four months of 2022-23, which needs to be maintained.
- Private capital expenditures, both corporate and non-corporate, must also rise.
- India’s growth path in the next few years must depend on domestic investment picking up.
Source The Hindu
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