GROWTH RATE AND

COMPOSITION OF
REAL GDP
Growth Rates and Composition of Real Gross Domestic Product (At 2011-12 Prices)

(At 2011-12 Prices)

(Per cent)

Growth Rate Share

Sector Average 2013-14 to

2014-15 2015-16 2016-17 2014-15 2015-16 2016-17
2016-17

1 2 3 4 5 6 7 8

Expenditure Side GDP

1. Private Final Consumption Expenditure 7.1 6.2 6.1 8.7 56.0 55.0 55.8

2. Government Final Consumption Expenditure 8.6 9.6 3.3 20.8 10.2 9.8 11.0

3. Gross Fixed Capital Formation 3.5 3.4 6.5 2.4 31.3 30.9 29.5

4. Change in Stocks 20.1 108.6 1.4 6.1 2.6 2.4 2.4

5. Valuables -9.5 26.2 -4.1 -17.5 1.8 1.6 1.2

6. Net Exports 33.6 11.8 15.1 37.4 -1.5 -1.2 -0.7

a) Exports 2.2 1.8 -5.3 4.5 23.8 20.9 20.4

b) Less Imports -2.7 0.9 -5.9 2.3 25.3 22.1 21.1

7. Discrepancies -167.8 34.8 -476.6 -50.0 -0.4 1.5 0.7

8. GDP 7.3 7.5 8.0 7.1 100.0 100.0 100.0

GVA at Basic Prices (Supply Side)

1. Agriculture, forestry and fishing 2.7 -0.2 0.7 4.9 16.5 15.4 15.2

2. Industry 7.5 8.6 10.2 7.0 22.6 23.1 23.2

of which :              

a) Mining and quarrying 6.0 11.7 10.5 1.8 3.0 3.1 3.0

b) Manufacturing 8.0 8.3 10.8 7.9 17.4 17.8 18.1

c) Electricity, gas, water supply & other utility services 5.9 7.1 5.0 7.2 2.2 2.1 2.2

3. Services 7.9 8.9 9.1 6.9 60.9 61.5 61.7

of which :              

a) Construction 3.5 4.7 5.0 1.7 8.6 8.4 8.0

b) Trade, hotels, transport, communication and services related to broadcasting 8.4 9.0 10.5 7.8 18.5 19.0 19.2

c) Financial, real estate & professional services 9.7 11.1 10.8 5.7 21.4 21.9 21.7

d) Public Administration, defence and other services 7.6 8.1 6.9 11.3 12.4 12.2 12.8

4. GVA at basic prices 7.0 7.2 7.9 6.6 100.0 100.0 100.0
The gross domestic product (GDP) is one
of the primary indicators used to gauge
the health of a country's economy. It
represents the total money value of all
goods and services produced over a
specific time period, often referred to as
the size of the economy. Usually, GDP is
expressed as a comparison to the
previous quarter or year. For example, if
the Q3 2017 GDP of a country is up 3%,
the economy of that country has grown
by 3% over the third quarter.
NOMINAL GDP V/S REAL GDP-
Nominal GDP is the GDP
calculated at current market prices.
It includes the changes in market
prices that take place during the
current year. To adjust for inflation/
deflation, real GDP is used. Here,
we calculate GDP using prices of
some base year. In the table given,
2011-12 is taken as the base year.
TERMS USED IN THE TABLE AND THEIR
DEFINITIONS-
1. Expenditure side GDP- It refers to the ‘Total
expenditure method’ of calculating GDP. There are four
main aggregate expenditures that go into calculating
GDP: consumption by households, investment by
businesses, government spending on goods and services,
and net exports, which are equal to exports minus imports
of goods and services.

2. Private Final Consumption Expenditure- It is the

expenditure by households and Non-Profit institutions
serving the households, on final consumption of goods
and services. The final consumption expenditure of
households relates to outlays on new durable as well as
non‑durable goods (except land) and on services.
3. Government Final Consumption Expenditure- It is the current expenditure by the government on
compensation of employees, purchase of non-durable goods and services. It also includes most expenditures
on national defence and security but excludes government military expenditures that are part of government
capital formation.

4. Gross Fixed Capital Formation- Gross fixed capital formation (GFCF) refers to the net increase in physical
assets and the change in inventory within the measurement period. It does not account for the consumption
(depreciation) of fixed capital. Fixed assets include plant, machinery, equipment and buildings, while
inventory includes works in process, which are partially completed goods that remain in production. It also
includes residential investment in housing that provides a flow of housing services over an extended time.

5. Valuables- The ‘valuables’ are broadly non-monetary gold and other precious metals and piece of art and
antiques. The ‘valuables’ are defined as follows:
 Precious stones and metals such as diamonds, non-monetary gold, platinum, silver, etc., held by any unit
including enterprises provided that they are not intended to be used as intermediate inputs into processes
of production;
 Paintings, sculptures, etc., recognized as works of art and antiques; and
 Other valuables, such as jewellery fashioned out of precious stones and metals and collections.
6. Net Exports- Net exports are the value of a country's total exports minus the value of
its total imports. In other words, net exports equal the amount by which foreign spending
on a home country's goods and services exceeds the home country's spending on foreign
goods and services.

7. Discrepancies- Discrepancies in the statistical GDP data refer to the difference in

national income under production method and expenditure method. They arise mainly
because data on private final consumption expenditure is not readily available. The
estimates are done by CSO.

8. GVA at basic prices- Gross value added (GVA) is defined as output (at basic prices)
minus intermediate consumption (at purchaser prices); it is the balancing item of the
national accounts' production account. The sum of GVA over all industries or sectors plus
taxes on products minus subsidies on products gives GDP. Basic prices exclude any taxes
on products the producer receives from the purchaser and passes on to the government
(Eg: GST or Sales Tax or Services Tax) but include any subsidies the producer receives
from government and uses to lower the prices charged to purchasers.
TRENDS IN GROWTH RATE

As per the table, the growth rate of GDP from 2013-14 to 2016-17
has averaged about 7.3%. In 2014-15, it was 7.5% and increased by
0.5% to 8% in 2015-2016. It declined to 7.1% in 2016-17.

EXPENDITURE SIDE
SUPPLY SIDE
INCREASE IN GROWTH RATE
 Analysis For the Year 2013-14
For the past two consecutive years 2012-13 and 2013-14,GDP at factor
cost has shown growth of less than 5%.
Persistent uncertainty in the global outlook caused by the crisis in the
EURO area and general slowdown in the global economy impacting the
demand for exports, low manufacturing base, delays in project approvals
among others and inflationary pressures has resulted in a protracted
slowdown.

Growth slowdown particularly affected the INDUSTRY SECTOR.

India's GDP grew marginally from 4.5 to 4.7 % due to high growth in
agriculture and allied sectors owing to favourable monsoons.
Mining and Quarrying (being part of the industry sector) have decelerated
since 2010-11 .This is mainly due to 2 important components of mining
sector being the COAL and CRUDE PETROLEUM. Gap between coal's
demand and supply has consistently been increasing. As coal and
petroleum are universal intermediates, the slack in their production
impacted the economy adversely.
• The slowdown in services, in particularly internal trade, transport and
storage sectors could be attributed to the loss of momentum in
commodity producing sectors. However, share of services is also
rising, biggest drivers being the COMMUNICATION, BANKING and
INSURANCE.

• INVESTMENTS comprise of Fixed Capital Formation, Acquisition of

Valuables and Change In Stock And Inventories. Investment faced
difficulties due to GLOBAL CRISIS.As demand slowed down, some
existing projects became unviable. Many large projects related to
environment, forest and land acquisition or raw materials required for
completion were unable to get timely clearances. Thus, a no. of
projects got stalled. The investment downturn was made worse by
difficulties in availability and cost of finance. The cost of borrowing
in domestic markets faced a sudden increase after 15 july,2013 due
to contractionary monetary policy followed to control inflation
• Further, Fiscal deficit was in line despite all challenges.
With a shortfall in tax revenues and disinvestment
receipts along with higher than budgeted subsidies and
interest and pension payments, Fiscal consolidation was
mainly achieved through reduction in expenditure from
the budgeted levels.
• Current Account Deficit reduced to 1.7% from 4.7%
because of improvement in NET EXPORTS brought about
by restrictions on non-essential imports and demand
slowdown.
• BOP position also improved mainly due to decrease in
import of Gold and Silver. Thus, restrictions on non-
essential imports and other incentives for capital flow
helped the economy
 Analysis For The Year 2014-15
GDP picked up in 2014-15, rising by 7.3 per cent on top of a growth of 6.9
per cent in 2013-14. The firming up of growth during 2014-15 was driven
mainly by private consumption and supported by fixed investment, even as
government consumption and net exports slackened considerably.

From the supply side, the quickening of activity in 2014-15 was largely led
by industry and services. Within industry, higher growth was observed in
manufacturing and electricity generation. 

In the services sector, ‘financial, real estate, and professional services’ as

well as construction were the primary drivers.

The agriculture sector lost momentum, adversely impacted by the deficient

southwest monsoon (SWM) which affected kharif sowing and by unseasonal
rains and hailstorms at the time of rabi harvesting.
The exports have declined  over 5 years because partner country growth and their absorption
of India’s exports have slowed down. Also major trading nations threaten to exclude India
from exports and put it at a competitive disadvantage position which led to a drastic decline
from 7.3 in the year 2013-14 to -0.8 in year 2014-15.

Higher production of basic metals, electricity and capital goods drove up the index of
industrial production (IIP) growth during 2014-15. In terms of the use-based classification, the
production of basic and capital goods accelerated, while that of intermediate goods
decelerated and the output of consumer goods contracted.

Industrial production turned in 2013-14 and posted a growth of 2.8 per cent during 2014-15. 

The production of consumer durables continued to shrink as in the previous year,

especially telephone instruments, including mobile phones which was due to the one-
off closure of Nokia’s manufacturing unit in Chennai in November 2014.

The growth of production in core industries (coal, crude oil, natural gas, refinery
products, fertilisers, steel, cement and electricity) moderated during 2014-15 and
remained sluggish during April-June 2015. 

The growth of the steel industry was affected by the fall in global prices of steel and
the resultant increase in steel imports.
On the other hand, the coal sector’s impressive
growth performance during 2014-15 benefitted from
several efficiency enhancing measures taken by the
government for Coal India Limited (CIL), like use of
mass production technologies, rationalisation of
linkages from coal sources to end-users, coordinated
efforts with railways for speedy evacuation of coal
and shifting to underground mines.

Thus, India emerged among the fastest growing

economies in the world, notwithstanding the still
sluggish global economy which dragged down the
contribution of net exports to growth in 2014-15.
 Analysis For The Year 2015-16 • The Government Final Consumption
Expenditure (GFCE) decelerated from 9.6
Expenditure Side GDP in the previous year to 3.3 in the current
year due to the fiscal consolidation
undertaken by the government during
CHANGE IN GR OWTH R ATE (%)
2015. Majority of the central finances were
2014-15 2015-16
revenue driven through cesses and revision
30
of duty on petrol and diesel.
26.2
• The Gross Fixed Capital Formation rose
25
from 3.4% to 6.5% in the current year
which can be owed to the inflow of Foreign
20
Direct Investment. India received the
15
15.1 highest annual net inflow of FDI in 2015-
11.8 16.
10
9.6 • Net exports only grew by 3.3% in
6.2 6.1 6.5 comparison to the previous year due to the
5
3.3 3.4
depressed international trading
environment.
0 • While the Private Final Consumption
PFCE GFCE GDCF VALUABLES NET EXPORTS
Expenditure almost remained the same as
-5 -4.1 it decelerated from 6.2% to 6.1% in the
current year.
-10
 Share In GDP
Private Final Consumption Expenditure
Was the major contributor to the
SHARE IN GDP (%) GDP with a share of 55%. The underlying
GFCE; 9.57%
reason being surge in the
Net Exports ; 1.17%
urban consumption resulting from higher
Real incomes due to the steady
disinflation.
Government Final Consumption
Expenditure
contributed approximately 10% due to
GFCF; 30.18%
the deficit reduction measures by the
government.
PFCE; 53.71%

India became a preferred destination for

FDI in 2015-16 as a result of which the
GDCF
contributed 30.9% to the GDP. Whereas
Valuables; 1.56%
Change in Stock ; 2.34%
Discrepancies; 1.46% exports and stock did not contribute
much to it.
 Supply Side : Comparative Analysis
CHANGES IN GROWTH RATE(%)
Agriculture, Forestry and
12
Fishing
10.2 Due to two consecutive years of
10
8.9 9.1 drought conditions as a result of
8.6

8
deficiency in precipitation and
coverage in the monsoon
6
seasons, agriculture showed
moderate growth as compared to
4
the contraction in the previous
year. It grew from -0.2% to 0.7%
2
this year. Another reason could
0.7 be development of horticulture
0 and other allied activities that
-0.2 AGRICULTURE INDUSTRY SERVICES
are comparatively less rain
-2 dependant
2014-15 2015-16
Industry
The contribution of the industrial sector towards the Gross Value Added rose from 8.6%
to 10.2% in the current year.
Industrial output slowed down due to a decline in the consumer non-durables on
account of deceleration in the fast-moving consumer goods but this was offset by the
durable goods. The manufacturing sector gathered momentum due to the boost
provided by the decline in input costs.
Electricity generation did not see much expansion due to the continued contraction in
hydel power. Low demand from financially stressed DISCOMs also acted as a hindrance.
 
Services
GVA in the services sector decelerated due to the slowdown in the public
administration, defence and other services which were held down by the restraint on
public expenditure.
Steel consumption and cement production improved in the fourth quarter.
Trade, hotels and restaurants were affected by a low in the foreign tourist arrivals.
Under the transportation sector domestic air passenger traffic and sales of commercial
and passenger vehicles rose.
 2016-17 The figure shows
EXPENDITURE SIDE the growth rate of
45 the components of
40 GDP in 2015-16
35 and 2016-17.
30 Clearly, private
25 final consumption
20 expenditure,
15 government final
10 consumption
5 expenditure and
0 exports have
PFCE GFCE GFCF CHANGE IN STOCKS VALUABLES NET EXPORTS
-5 increased while
-10 growth in gross
-15 fixed capital
-20 formation and
-25 valuables have
2015-16 2016-17 declined.
 SHARE IN GDP
2016-17
The figure
shows the
29.32%
2.39% 1.19% 0.70% percentage
share of
various
55.47% components of
expenditure in
the total GDP
10.93%
of 2016-17.

PFCE GFCE GFCF CHANGE IN STOCKS VALUABLES NET EXPORTS

 SUPPLY SIDE
12

The above
10 figure
shows the
8
percentage
6
growth in
Primary,
4 Secondary
and Tertiary
2
sectors in
2015-16
and 2016-
0
AGRICULTURE INDUSTRY SERVICES

2015-16 2016-17
17.
ANALYSIS
India lost its fastest-growing major economy tag in the fourth quarter of 2016-17, with GDP growth
coming in at 6.1% compared with China’s 6.9% in the same period.
Data from the Ministry of Statistics showed GDP grew 7.1% in the financial year 2016-17, slower
than the 8% registered in 2015-16. The GDP numbers were based on the new 2011-12 base year
recently adopted for data including the Index of Industrial Production (IIP) and Wholesale Price
Index (WPI). Gross value added (GVA) growth was 6.6% for 2016-17 and 5.6% in the fourth
quarter, compared with 7.9% in 2015-16 and 8.7% in Q4 of that year.
SECTORAL HIGHLIGHTS
1. Moderation in industrial and non-government service sectors
2. Modest pickup in agricultural growth on the back of improved monsoons
3. Growth in public administration and defence services

In 2016-17, growth of agriculture and allied sectors improved significantly, following the normal
monsoon which was preceded by sub-par monsoon in 2014-15 and 2015-16.

The Economic Survey, that presents the status of the financial health of the economy, has said the
eight-core infrastructure supportive industries -- coal, crude oil, natural gas, refinery products,
fertilizers, steel, cement and electricity -- registered a cumulative growth of 4.9 per cent during
April-November 2016-17 as compared to 2.5 per cent during the same period previous fiscal.
MANUFACTURING SECTOR- It
witnessed a decline to 7.9% from 10.8%
mostly on account of steep contraction in
capital goods. Contraction in mining and
quarrying reflects slowdown in production
of crude oil and natural gas.

SERVICE SECTOR- It continued to be

dominant contributor to overall growth in
the economy led by significant pick-up in
public administration, defence and other
services that were boosted by the pay out of
the 7th Pay Commission.
IMPACT OF DEMONETISATION ON GDP
India’s economic growth slowed to 6.1% in the fourth quarter ending March 2017, compared with 7.1% in
the previous quarter, as the government’s note ban decision slowed activity in cash-dependent sectors.
According to the economic survey of 2016-17, impact on GDP can be assessed by following factors-
1. Agriculture (Rabi sowing)
2. Indirect Tax Revenge as a broad gauge of production and sales
3. Auto Sales, as a measure of discretionary consumer spending
4. Real credit growth
5. Real estate prices

Property markets in major cities and sales of 2 wheelers showed a marked decline. Due to demonetisation,
growth slowed as it reduced demand (cash, private wealth), supply (reduced liquidity and working capital
and disrupted supply change) and increased uncertainty. Cash Incentive sectors i.e. agriculture, real
estate, jewellery which were affected more. The existence of a large informal sector has been one of the
most important factors in this dominance of a cash-based economy. Nearly 45% of gross value added
(GVA) in the economy (average of 2011-15) was generated in the informal sector. Demonetisation of high
denomination notes (of Rs1,000 and Rs500) has put over 85% of currency out of circulation. This has
resulted in short-term disruptions in transactions in agriculture and related sectors, small establishments,
households and among professionals. Since injection of liquidity is slow, incomes in both formal and
informal sectors have been affected with the intensity of adverse impact being greater for the informal
sector.
External Sector- In line with subdued
global growth and trade, India exports
declined by 1.3% and 15.5% in 2014-15
and 2015-16 respectively. The trend of
negative growth was reversed somewhat
during 2016-17(April to December) with
exports registering a growth of 0.7%.
Improvement in exports was linked to
improvement in world economy, led by
better growth in USA and Germany.