The Hindu Editorial Analysis- 12th August 2023 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

India needs a new economic policy

Why in News?

The National Statistical Office (NSO) has released provisional national income data revealing that India’s GDP growth in the January to March 2023 quarter reached 6.1%.

• This growth in the fourth quarter is the fastest among major economies, indicating better prospects for the current year compared to previous expectations.

Key Highlights

(1) Manufacturing Sector Growth Slows, Despite Q4 Rebound

• Gross Value Added (GVA) in the economy rose by 7% in 2022-23, compared to 8.8% in the previous fiscal year.
• Manufacturing GVA growth declined significantly, reaching only 1.3% compared to 11.1% a year ago.
• The sector experienced a rebound of 4.5% in the final quarter after six months of contraction, but overall growth remained subdued.

(2) Agri and Services Sectors Propel Economic Growth

• The agricultural GVA grew by 4% in 2022-23, an increase from 3.5% in the previous year.
• Financial, real estate, and professional services sectors experienced a 7.1% growth in GVA, compared to 4.7% in 2021-22.
• Trade, hotels, transport, and communication sectors, along with services related to broadcasting, witnessed a marginal increase of 14% in GVA.

(3) Revised GDP and GVA Figures Reflect Changes in Economic Performance

• The NSO revised GDP and GVA numbers for the first half of 2022-23, with slight decreases, but the third-quarter figures were slightly increased.
• The first quarter’s GDP growth in 2022-23 is now pegged at 13.1%, followed by 6.2% in the second quarter and 4.5% growth in the third quarter.
• GVA growth estimates for the first and second quarters were revised to 11.9% and 5.4% respectively, while the third quarter GVA growth increased to 4.7% from the earlier estimate of 4.6%.

(4) Consumer Sentiment and Consumption Growth

• Despite a slight uptick in private final consumption expenditure to 2.8% in Q4 from 2.2% in Q3, consumption growth remained muted.
• This contradicted the uptick in consumer sentiments as per the RBI’s consumer confidence survey, highlighting the disparity between sentiment and actual spending.

(5) Outlook and Challenges for Future Growth

• Maintaining growth above 6% will be challenging amid a global economic slowdown, according to economists.
• Higher-than-expected GDP growth in the previous year may temper growth expectations for the current year, with the government and central bank projecting around 6.5% growth.
• Pent-up demand that supported growth previously may not be as strong, and private sector investment needs to pick up since exports are not expected to contribute significantly to growth.

The Recently Released Data

• GDP:
  • India’s 6.1% GDP growth was the fastest among major economies in the fourth quarter and the prospects look better for this year than they did four months ago.
• GVA:
  • It is estimated to have risen 7% in 2022-23, compared to 8.8% in 2021-22, with manufacturing GVA growth sliding to just 1.3% from 11.1% a year ago.
  • Economists noted that though several sectors delivered a positive surprise, consumption remained weak and the overall growth pattern remains uneven.
• Agri, services growth:
  • The agricultural GVA grew 4%, up from 3.5% in the previous year.
  • The financial, real estate and professional services sectors saw their GVA grow 7.1%, compared to 4.7% in 2021-22.
  • The GVA of the trade, hotels, transport, and communication sectors, as well as services related to broadcasting grew 14%, marginally faster than in the previous year.
  • This means the current economic outcomes are boosted by the farm and services sector.

Takeaways from the Recent Data

• The 2022-23 GDP growth figures underscored the resilience of the Indian economy amidst global challenges.
• Exports of goods and services accounted for 23.5% of GDP, the highest since 2014-15.
• The private consumption hit the highest level since 2006-07 at 58.5% and gross fixed capital formation is at the highest point (34% of GDP) since 2013-14.
• GVA from the employment-intensive construction sector grew 10% in 2022-23, from 14.8% in 2021-22.
• However, the phenomenon of pent-up demand that lifted services through last year and this fiscal year’s first two months will not be strong, and private sector investment has to pick up.

What can we as an Aspirant infer?

• The resilience of the Indian economy and its promising trajectory despite global challenges is often highlighted in news.
• This article justifies this perception about better performance of Indian Economy.

Conclusion

• To sustain and enhance economic growth, focus on stimulating private sector investment to complement the performance of agriculture and services sectors.
• Addressing the challenges in the manufacturing sector and boosting consumer confidence can lead to increased consumption and overall economic expansion.
• Efforts to diversify and promote exports should be prioritized to contribute to future growth and reduce dependence on domestic consumption.