The first advance estimates of India’s GDP are now available

  • Growth Forecast: According to the government’s First Advance Estimates (FAEs), India’s GDP would rise by 7.3% in fiscal year 2023-24.
  • When compared to the previous year: This rate of growth is slightly greater than the 7.2% recorded in 2022-23.

What exactly is the Gross Domestic Product (GDP)?

  • GDP is the total monetary worth of all goods and services produced inside a country’s borders over a specified time period, usually a year.
  • GDP is separate from Gross National Product (GNP), which quantifies the value of goods and services generated by a country’s nationals regardless of location of production.

First Advance Estimates of GDP

  • Introduction and Timing of the First Advance Estimates of GDP: The First Advance Estimates (FAE) were introduced in the fiscal year 2016-17 and are announced at the beginning of January.
  • Estimates are the initial official forecasts of GDP growth for the fiscal year, which are published before the year ends.
  • statistics Exclusion: Notably, the FAE do not include formal GDP statistics for the third quarter (October to December), which is provided at the end of February along with the Second Advance Estimates (SAE).

Significance of FAE

  • FAE Election Year Context: With Lok Sabha elections scheduled for April-May, the FAEs take on added significance, even if a full-fledged Union Budget will not be delivered this year.
  • Budgetary Importance: Because the SAE are announced after the budget is finalised, the FAE are critical for the Union Finance Ministry’s budgetary planning for the next fiscal year.
  • Concentrate on Nominal GDP: The emphasis in budgeting is on nominal GDP (the observable variable), encompassing both absolute level and growth rate.
  • Real GDP vs. Nominal GDP: Real GDP is a derived number that is corrected for inflation, whereas all budget calculations begin with nominal GDP.

GDP Growth Evaluation

  • Real GDP Growth: By March 2024, real GDP (adjusted for inflation) is estimated to reach over Rs 172 lakh crore.
  • In comparison to Modi’s tenure, The GDP has increased from Rs 98 lakh crore at the beginning of Prime Minister Modi’s first term to around Rs 140 lakh crore at the start of his second term.
  • Trends in Growth Rates: The projected 7.3% growth rate for 2023-24 is greater than most estimates, indicating a robust economic recovery. However, growth has slowed significantly under Modi’s second term compared to his first.

Factors Influencing India’s Growth

  • Private Final Consumption Expenditure (PFCE): PFCE, which accounts for over 60% of GDP, is predicted to expand by 4.4% this year.
  • Gross Fixed Capital Formation (GFCF): Investment spending has increased by 9.3% this year, making it the second-largest growth engine.
  • Government Final Consumption Expenditure (GFCE): Growth in government spending has been slower this year, at 3.9%.
  • Net exports are declining, indicating a larger import-than-export rate, which has climbed by 144% this year.

Concerns and Difficulties

  • Private spending: Private spending is subdued, particularly in rural India.
  • Investment Spending: The government continues to fuel a sizable amount of investment spending, while private consumption remains muted.
  • Government expenditure: Government expenditure growth has been relatively moderate in Modi’s second term.
  • Net Exports: The negative rise in net exports, albeit a slight improvement over the previous two terms, nonetheless implies a trade imbalance.
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