A

Descriptive Report File

On

“THE GDP RATE OF INDIA”

Submitted as the SEMESTER-1 (Mid-2 Assignment)

of

MASTER OF BUSINESS ADMINISTRATION

in

BUSINESS MANAGEMENT

Submitted By :- Submitted To :-

• Akash Patel (Y23282506) Mr . Meghwant Singh Thankur

• Aman Vashney (Y23282507) Assistant Professor
• Anu Krishnan (Y23282508) Department of Business Administration
• Deepanshu Ikka (Y23282510)
 TABLE OF CONTENTS

1. Introduction ................................................. 0

2. What is GDP Growth rate?.......................... 0

3. Current GDP growth rate in India ............... 1

4. Challenges faced by India in GDP growth .. 2

5. Why India’s GDP Recovery is Inadequate . 3

Why is GDP Recovery Challenging? .................... 3

6. What are the possible Solution of inadequacy .. 5

What are the Possible Solutions? ............... 5

7. History of GDP............................................ 6
GDP Growth Rate in
 INTRODUCTION

India would be completing 90 years of independence in 2036-37. In its journey in the last 75 years,
from gaining independence in 1947 to 2022, India’s growth path has followed an interesting pattern.
The country had followed a mixed ideology for the first few decades under centralized planning and
by 1991, decided to undertake significant reforms and open the domestic market to global economy.
Since 1991, reforms in the financial and external sector as well as in industrial policy have yielded
positive results. Consequently, with increased opportunities and competition, the growth rate increased
substantially as well as the investment rate. The economy is robust and withstood the onslaught of the
Asian crisis and the global financial crisis.3 The second-generation reforms in agriculture sector and
labour market are being initiated
which are also expected to lead
India into a higher growth
trajectory

India has emerged as the fastest-

growing major economy in the
world and is expected to be one
of the top three economic
powers in the world over the
next 10-15 years, backed by its
robust democracy and strong
partnerships.

India's GDP has averaged

$741.43 billion from 1960 to
2022, with a record high of $3,385.09 billion in 2022. In 1947, India's GDP was 2.7 lakh crore, which
was 3% of the world's total GDP. In 2018, India became the world's fifth largest economy, behind only
the United States, China, Japan, and Germany.

WHAT IS GDP GROWTH RATE?

GDP growth rate refers to the pace at which a country's Gross Domestic Product (GDP)
expands or increases over a specific period, usually measured annually or quarterly. Gross
Domestic Product (GDP) is the market worth of all final services and products produced within
its boundaries over a certain period.

The GDP growth rate is calculated by comparing the GDP of one period with the GDP of a
previous period. It is expressed as a percentage and provides a measure of the country's

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economic performance and overall economic health. If the GDP growth rate is positive, the
economy is growing; if it is negative, the economy is contracting or in recession.

GDP is calculated using the following formula:

Y = C + I + G + (X − M)

• C represents consumption, which includes spending on services, non-durable

goods, and durable goods.
• G represents government expenditure, which includes salaries of employees,
construction of roads, railways, airports, schools, and military expenses.
• I denotes investment, which consists of spending on housing and equipment.
• The difference between total exports and imports is referred to as net exports,
denoted by (X-M).
• In this context, Y represents Gross Domestic Product.

CURRENT GDP GROWTH RATE IN INDIA

India’s current GDP (Q2 and FY24) India’s GDP registered a growth of 7.6 percent in the
second quarter of FY24. The new numbers have exceeded the expectations of the RBI, which
had earlier in October projected a GDP growth rate of 6.5 percent for Q2 of FY24. According
to government data, India’s GDP growth rate is higher than the major economies such as
Russia, the USA, China, and the UK,
which have registered a growth of 5.5
percent, 5.2 percent, 4.9 percent, and
0.6 percent, respectively, in the same
period.

According to a statement on November

30 by the Ministry of Finance, the
share of private consumption in GDP
amounted to 61 percent in Q2 of FY24,
compared to 59.7 percent in the
previous quarter.

Manufacturing and construction are

significant contributors to the current
growth in GDP. Despite slower global
growth, manufacturing and
construction grew at 13.9 percent and 13.3 percent, respectively. The contribution of exports
to the GDP also increased from 21.4 percent in Q1 of FY24 to 21.9 percent in Q2.

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The manufacturing sector, which for the past decade has accounted for just 17% of the
economy, expanded 13.9% year-on-year in the September quarter, compared with a revised
4.7% in the previous three months.

Manufacturing sectors such as mobile phone and electronics manufacturing have benefited
from several production-linked incentive schemes of the Indian Government. Other sectors,
such as mining and quarrying, have also witnessed high growth.

While most sectors have registered growth in Q2, some have also recorded a slowdown.
Trade, transport, hotels, and communications have a declining growth rate of 4.3 percent
versus 15.6 percent YoY. Similarly, livestock, fishing, agriculture, and the forestry growth
rate has also declined to 1.2 percent versus 2.5 percent YoY.

Earlier on Thursday, the government data showed that the output of eight key infrastructure
sectors rose by 12.1% in October 2023 as against 0.7% expansion a year ago. All the sectors
except for fertiliser recorded healthy production growth in the month under review.
The International Monetary Fund (IMF) had in October raised India’s GDP growth forecast for
India for the financial year 2023-24 to 6.3%, its second upward revision since the April report.
IMF attributed stronger-than-expected consumption during April-June for the upward
projection in the growth estimate.
Recently, industry body FICCI in a survey found that the Indian economy is projected to grow
by 6.3% in 2023-24 with a minimum and maximum growth estimate of 6% and 6.6%,
respectively.

India has outperformed all major countries in terms of growth in real GDP in the Sep’23
quarter. In fact, India has done remarkably well when compared with its developed
counterparts.

• Growth in the Eurozone continues to languish, led by a sharp and protracted slowdown
in Germany.
• Amongst developed countries, US has performed the best, even so at 2.8%, it is still
much below India.
• An interesting thing to note here is that Emerging economies have done much better
than the developed economies, and the trend is likely to continue.
• To put this in perspective, while the average growth differential between India and
advanced economies is about 7%, for EMs it is much lower at ~4%.
• Growth in some EMs such as Indonesia, Vietnam, Turkey and Philippines has been
note worthy, even though it continues to trail India.
• China, which was once touted as the engine of global growth, continues to grapple with
the after effects of the long-drawn Covid-19 pandemic and property sector crisis. It
registered a subdued growth of just 4.9%.

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CHALLENGES FACED BY INDIA IN GDP GROWTH

The Indian economy is one of the fastest-growing economies in the world. However, it faces
a number of challenges that need to be addressed in order for it to continue to grow.

• Population Density:-
The population density of India is one of the highest in the world. This population
density, coupled with Indian infrastructure which is not able to keep up with the
population growth, is one of the main problems that the Indian economy faces.

• Poverty Problems:-
Another challenge faced by the Indian economy is poverty. Nearly 22% of the
population lives below the poverty line. This means that a large portion of the
population is not able to participate in the economy and this leads to a vicious cycle of
poverty.

• Unemployment:-
Unemployment is another big challenge that the Indian economy faces. The
unemployment rate in India is at a 45-year high. This means that there are a lot of
people who are not able to find jobs. This leads to a lot of social problems as well.

• Payment Deterioration:-
One of the most recent challenges faced by the Indian economy is payment
deterioration. This is caused by the delay in payments from the government to
contractors and suppliers. This has led to a lot of financial problems for the
contractors and suppliers.

• Poor Education:-
Another challenge that the Indian economy faces is poor education. The literacy rate
in India is only around 74%. This means that a lot of people are not able to get good
jobs and participate in the economy. This leads to a lot of social problems as well.

• Private Debt:-
Another challenge faced by the Indian economy is private debt. The private debt to
GDP ratio in India is one of the highest in the world. This means that a lot of people
have taken out loans and are not able to repay them. This leads to a lot of financial
problems for the economy.

• Fixed Labour Laws:-

Another challenge faced by the Indian economy is fixed labour laws. These laws
make it very difficult for companies to lay off workers. This leads to a lot of
inefficiency in the economy and leads to a lot of financial problems for the
companies.

• Inadequate Infrastructure:-
One of the biggest challenges faced by the Indian economy is inadequate
infrastructure. The infrastructure in India is not able to keep up with the population
growth. This leads to a lot of problems such as traffic jams, power cuts, and water
shortages.

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WHY INDIA’S GDP RECOVERY IS INADEQUATE

India's latest GDP estimates have exceeded even the most optimistic projections, leading to
upward revisions of economic growth estimates for the ongoing financial year. India's GDP
estimates indicate a recovery from the depths experienced during the pandemic. However, the
recovery is not adequate with challenges persisting in rural demand, manufacturing
performance, household expenditure, informal sector's growth, investment patterns, depressed
household expenditure, and economic loss pose challenges to the country's growth prospects.
Resolving these contradictions is crucial for achieving sustainable and balanced economic
growth.

WHY IS GDP RECOVERY CHALLENGING?

▪ Subdued Rural Demand despite Agricultural Growth:

o Rural markets lagging:
• Despite robust growth in the agricultural sector, rural
demand remains subdued, with volume growth in
rural markets remaining sluggish.
o Per capita earnings weighed down:
• Increased engagement of workers in the farm sector
results in lower per capita earnings.
o Poor performance of the non-farm sector:
• The non-farm sector, which contributes significantly
to rural household incomes, is possibly faring poorly.
• Work demanded by households
under MGNREGA, though fallen below as observed
during the Covid years, remains well above the pre-
pandemic levels.
• In 2022-23, 8.76 crore individuals worked under the
programme, as compared to 7.88 crore in 2019-20, and
7.77 crore in 2018-19.
•

▪ Industrial Sector Slowdown and Manufacturing Performance:

o Industrial Sector Slowdown:
• The industrial sector, especially manufacturing, has
significantly slowed down.
• Manufacturing sector growth for the full year was a
mere 1.3%, despite a turnaround in the fourth quarter.
▪ Rise in Informal Sector Employment within Non-Farm Sector:
o Informal Sector Employment:

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 • The share of workers engaged in proprietary and
partnership enterprises (informal sector firms) within
the non-agricultural sector has increased from 68.2%
(2017-18) to 71.8% (2021-22).
• The rise in informal sector employment contradicts
government efforts to formalize the economy and
boost employment opportunities.
▪ Investment Activity and Current Account Dynamics:
o Healthy Investment Growth:
• Investment activity experienced healthy trend, with
the investment-to-GDP ratio reaching 29.2% (2022-
23).
o Household Sector Driving Growth:
• Two-thirds of the increase in the investment ratio was
driven by the household sector, followed by the public
sector and private sector firms.
o Possibility of Current Account Surplus:
• The recent GDP data suggests the potential for a
current account surplus or a minimal deficit, indicating
weak investment demand relative to savings.
▪ Depressed Household Expenditure and Impact of Inflation:
o High-end Spending vs. Overall Household Expenditure:
• Spending on high-end goods and services has grown,
while overall household expenditure remains
depressed due to subdued spending by lower and
middle-income households.
o Low Income Growth:
• Limited opportunities for productive employment and
low-income growth contribute to suppressed
household expenditure.
o Inflation's Erosion of Purchasing Power:
• Steady inflation erodes the purchasing power of
households, constraining consumption.
▪ Economic Loss and the Uneven Recovery:
o Real Growth Shortfall:
• Compared to the pre-pandemic trend growth, the
Indian economy's real growth remains lower than
current levels, signifying an economic loss.

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WHAT ARE THE POSSIBLE SOLUTION OF INADEQU ACY
WHAT ARE THE POSSIBLE SOLUTIONS?

▪ Boosting Rural Demand:

o Enhance the non-farm sector in rural areas through targeted
policies and initiatives to stimulate growth and employment
opportunities.
o Improve infrastructure and connectivity in rural regions to attract
investments and promote economic activities.
o Increase access to credit and financial services for rural
households and entrepreneurs to encourage entrepreneurship and
small business development.
o Implement measures to bridge the income gap between the farm
and non-farm sectors, ensuring equitable distribution of economic
benefits.
▪ Reviving the Manufacturing Sector:
o Implement sector-specific policies to incentivize manufacturing,
such as tax incentives, simplified regulations, and ease of doing
business reforms.
o Encourage innovation, research and development, and
technology adoption in the manufacturing sector to enhance
productivity and competitiveness.
o Strengthen skill development programs to address the skill gap in
the labor force and align it with the requirements of the
manufacturing industry.
o Facilitate public-private partnerships and collaboration to attract
investments and promote industrial growth.
▪ Formalization of the Informal Sector:
o Introduce policies and programs to promote the formalization of
informal sector enterprises, such as providing access to finance,
simplifying registration procedures, and offering incentives for
compliance.
o Enhance the social security net for workers in the informal
sector to improve their income security and overall well-being.
o Foster an enabling environment for informal enterprises to
transition to the formal sector by providing business development
support, training, and access to markets.
▪ Addressing Income Inequality and Boosting Household Expenditure:
o Implement progressive taxation policies to redistribute income and
reduce wealth disparities.
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 o Enhance social welfare programs and safety nets to provide support
to low-income households and vulnerable groups.
o Increase investment in education and skill development to empower
individuals and improve their employability.
o Combat inflationary pressures through effective monetary and
fiscal policies to protect the purchasing power of households.
▪ Monitoring and Evaluation:
o Establish robust mechanisms to monitor and evaluate the
effectiveness of implemented policies and interventions.
o Regularly assess the impact of policy measures on key economic
indicators and make necessary adjustments to ensure desired
outcomes.
o Encourage research and data-driven decision-making to inform
policy formulation and implementation

HISTORY OF GDP

WILLIAM PETTY came up with a concept of GDP, to calculate the tax burden,
and argue landlords were unfairly taxed during warfare between the Dutch and
the English between 1652-74. Charles Davenant developed the method further
in 1695.The modern concept of GDP was first developed by Simon Kuznets for
a 1934 U.S. Congress report, where he warned against its use as a measure of
welfare (see below under limitations and criticisms). After the Bretton Woods
Conference in 1944, GDP became the main tool for measuring a country's
economy.

The role that measurements of GDP played in World War II was crucial to the
subsequent political acceptance of GDP values as indicators of national
development and progress. A crucial role was played here by the U.S.
Department of Commerce under Milton Gilbert where ideas from Kuznets were
embedded into institutions.

The history of the concept of GDP should be distinguished from the history of
changes in many ways of estimating it. The value added by firms is relatively
easy to calculate from their accounts, but the value added by the public sector,
by financial industries, and by intangible asset creation is more complex. These
activities are increasingly important in developed economies, and the
international conventions governing their estimation and their inclusion or

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exclusion in GDP regularly change in an attempt to keep up with industrial
advances. In the words of one academic economist, "The actual number for
GDP is, therefore, the product of a vast patchwork of statistics and a
complicated set of processes carried out on the raw data to fit them to the
conceptual framework.

CONCLUSION

Both the general government fiscal deficit and public debt to GDP ratio
increased sharply in Financial year 20/21 and have been declining gradually
since then, with the fiscal deficit falling from over 13 percent in FY20/21 to an
estimated 9.4 percent in FY22/23. Public debt has fallen from over 87 percent
of GDP to around 83 percent over the same period. The consolidation has
largely been driven by an increase in revenues and a gradual withdrawal of
pandemic-related stimulus measuresIn FY22/23, India’s real GDP expanded at
an estimated 6.9 percent. Growth was underpinned by robust domestic demand,
strong investment activity bolstered by the government’s push for investment in
infrastructure, and buoyant private consumption, particularly among higher
income earners. The composition of domestic demand also changed, with
government consumption being lower due to fiscal consolidation. At the same
time, the government has remained committed to increasing capital spending,
particularly on infrastructure, to boost growth and competitiveness.

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