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The Ministry of Statistics and Programme Implementation (MOSPI) recently reported that India’s Gross Domestic Product (GDP) grew by 7.6% in the second quarter (Q2) of 2023-24, surpassing all market expectations. This data suggests a strengthening economic recovery, three years after the country plunged into a technical recession. However, such economic growth must be accurately measured and strategically sustained to ensure robust progress.
A Closer Look at India’s GDP Growth
Data from MOSPI shows India’s Q2 GDP growth rate for 2023-24 significantly outperforming market predictions. The unexpected surge has led to numerous GDP predictions for the entire fiscal year being revised upwards. The Reserve Bank of India’s (RBI) forecast of 6.5% growth, which initially seemed optimistic, now aligns with many expert revisions, indicating an accurate prediction. An important implication of this development is that RBI is unlikely to cut interest rates sooner than anticipated.
By comparison, three years prior, the same Q2 GDP data from MOSPI signalled the onset of a technical recession in India. Nevertheless, the current growth trajectory instills hope that India’s economic recovery is gaining speed.
Understanding Economic Growth Measurement
There are two primary ways to calculate economic growth: examining people’s spending patterns via GDP and determining the value-added of a sector through Gross Value Added (GVA). There’s often a disparity between the two methods, referred to as a discrepancy, which has stirred up controversies, particularly during the release of first-quarter GDP data. While GVA is typically used for assessing quarterly economic trends, GDP is preferred for evaluating annual trends.
Strategies to Enhance India’s Economic Growth
India needs to advance in several key areas to ensure a more robust growth rate. These include boosting both investment and consumption to increase domestic demand, enhancing manufacturing and exports to add value, generate employment, and meet external demand. To achieve this, the government can continue implementing initiatives such as the Atmanirbhar Bharat package, production-linked incentive scheme, and national infrastructure pipeline.
Investing in human capital and social services is crucial for improving the living standards and productivity of India’s large and young population. The government can implement programs focusing on education, health, skills, nutrition, water, sanitation, energy, housing, and healthcare.
It’s vital to maintain macroeconomic stability and resilience as these provide the necessary conditions for sustained economic growth and help cope with any shocks or uncertainties. Prudent fiscal and monetary policies can strike a balance between growth and inflation objectives.
Relating Economic Development to UPSC Examination
Previous Year Questions (PYQs) of the UPSC Civil Services Examination test knowledge of economic development. In 2018, a question asked was why an increase in absolute and per capita real GNP does not necessarily imply higher levels of economic development, highlighting the complexity of economic indicators. Another question in 2019 explored why poverty lines vary across states, underlining the diverse economic landscapes within India.
