GDP growth projected to fall to four-year low at 6.4%
(Source – The Hindu, International Edition – Page No. – 1)
| Topic: GS3 – Indian Economy |
| Context |
| ● The National Statistics Office (NSO) projects India’s real GDP growth for 2024-25 at 6.4%, a four-year low, compared to 8.2% in 2023-24.
● The economy, which grew 6% in the first half of 2024-25, is expected to rebound with a 6.8% growth in the second half. |
Sectoral Growth Trends
- Agriculture: Growth is expected to rise significantly to 3.8% from 1.4% in 2023-24.
- Public Administration, Defence, and Other Services: These sectors are projected to grow by 9.1%, up from 7.8% last year.
- Manufacturing: Growth is estimated to slow down sharply from 9.9% in 2023-24 to 5.3% in 2024-25.
- Mining and Quarrying: Growth is expected to dip to 2.9% from 7.1% in the previous year.
Investment Growth Concerns
- Gross Fixed Capital Formation (GFCF), an indicator of fresh investments, is projected to grow at 6.4%, down from 9% in 2023-24.
Economic Challenges and Budget Implications
- Reviving the economy’s growth to the 7%-plus levels seen in preceding years is identified as a key challenge for the Union Budget 2025-26.
- The Reserve Bank of India has revised its growth projection for the full year to 6.6%, down from the earlier estimate of 7.2%.
- The Finance Ministry now expects growth for 2024-25 to be ‘around 6.5%’, revising its earlier range of 6.5% to 7%.
| Reasons and Way Forward: |
| Reasons for Decline in India’s GDP Growth
● Global Economic Slowdown: The global economic slowdown has impacted India’s exports and foreign investments, contributing to the decline in growth. ● Weak Domestic Demand: Consumer spending and private investment have been sluggish, affecting domestic demand and economic growth. ● Manufacturing Slowdown: The manufacturing sector, a key driver of economic growth, has experienced a slowdown due to various factors, including weak global demand and domestic challenges. Way Forward ● Boosting Investment: Encouraging private investment through policy reforms and infrastructure development is crucial for reviving economic growth. ● Reforming Labor Markets: Implementing labor market reforms to enhance flexibility and productivity can boost employment and economic activity. ● Improving Ease of Doing Business: Streamlining business regulations and reducing bureaucratic hurdles can encourage entrepreneurship and attract foreign investment. ● Focus on Exports: Diversifying exports and promoting export-oriented sectors can boost economic growth and create jobs. ● Addressing Rural Distress: Addressing the challenges faced by the agricultural sector and improving rural incomes can boost domestic demand and economic growth. |
| PYQ: Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP?(150 Words /10 marks)(UPSC CSE (M) GS-3 2020) |
| Practice Question: Examine the reasons for the projected decline in India’s GDP growth for 2024-25 and suggest measures to restore the economy to a 7%-plus growth trajectory. (250 Words /15 marks) |
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