India’s GDP Growth Hits 2-Year Low

Why in news?

The National Statistical Office (NSO) has released the GDP report for the second quarter (July-September) of the financial year 2024-25. India’s GDP grew by 5.4% during this period, down from 6.7% in the previous quarter.

• This growth is also below the analysts’ projection of 6.5%.
• The report highlights the country’s economic trends, progress, and current challenges.

Key Points:

1. Decline in GDP Growth:
   • GDP growth rate for the second quarter (July-September) stood at 4%, marking the lowest in 7 quarters and the slowest in the past 2 years.
   • The GDP growth estimate was 5%.
2. Comparison with Previous Quarter and Last Year:
   • GDP growth in the April-June quarter was 7%.
   • In Q2 of FY24, GDP growth was 1%.
3. Weak GVA Growth:
   • Gross Value Added (GVA) growth rate for Q2 was 6%, lower than the estimated 6.3%.
   • GVA growth in the April-June quarter was 8%, and in Q2 of FY24, it was 7.7%.
4. RBI’s Estimate: GDP growth was below the 7% estimate by the Reserve Bank of India (RBI).

Key Economic Data (YoY Growth):

1. Agriculture Sector: Estimated growth: 7%, Actual growth: 3.5%.
2. Manufacturing Sector: Estimated growth: 3%, Actual growth: 2.2%.
3. Electricity and Public Utilities: Estimated growth: 5%, Actual growth: 3.3%.
4. Construction Sector: Estimated growth: 6%, Actual growth: 7.7%.
5. Financial Services: Estimated growth: 2%, Actual growth: 6.7%.
6. Public Administration: Estimated growth: 7%, Actual growth: 9.2%.
7. Trade, Hotels, Transport, and Communication: Estimated growth: 5%, Actual growth: 6%.
8. Mining: Estimated growth: 1%, Actual growth: -0.1%.
9. Power and Gas: Estimated growth: 5%, Actual growth: 3.3%

Government and RBI GDP Estimates:

1. Reserve Bank of India (RBI):
   • Estimated Q2 GDP growth: 8%.
   • FY 2024-25 overall GDP growth estimate: 2%.
2. Finance Ministry: FY 2024-25 GDP growth expected to be between 5% and 7%.
3. NSO Data: Significant economic recovery is required in H2 FY 2024-25 to meet the government’s and RBI’s projected growth estimates.

Positive Outlook on Economic Growth:

1. Resilience in Key Sectors: Sectors like agriculture, construction, and parts of manufacturing demonstrate resilience, boosting economic optimism.
2. Agricultural Growth: Record production in Kharif food grains and promising Rabi crop prospects indicate a strong recovery in the rural economy.
3. Labour Market Improvements: Signs of improvement are visible in the labour market, though further policy interventions are essential to sustain this progress.

Gross Domestic Product (GDP):

Definition: Gross Domestic Product (GDP) measures the total value of all final goods and services produced within a country’s domestic boundaries during a financial year.

Important Concepts:

1. Final Goods and Services:
   • GDP includes only final products and services.
   • Intermediate goods (e.g., raw materials) are excluded to avoid double counting.
2. Within Domestic Economy:
   • GDP accounts for all goods and services produced within a country’s geographic boundaries.
   • It includes contributions by foreign workers within the country and domestic contributions by the country’s citizens.

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