Introduction

Growth Projection: India’s GDP is projected to grow by 7.3% in the financial year 2023-24, as per the First Advance Estimates (FAEs) released by the government.
Comparison with Previous Year: This rate is slightly higher than the 7.2% growth recorded in 2022-23.

What is Gross Domestic Product (GDP)?

Definition: GDP quantifies the total monetary value of all goods and services produced within a country’s borders in a specific time frame, typically annually.
Difference from GNP: GDP is distinct from Gross National Product (GNP), which measures the value of goods and services produced by a country’s nationals, regardless of the production location.

Introduction and Timing: First introduced in the financial year 2016-17, the First Advance Estimates (FAE) are released at the beginning of January.
Nature of Estimates: They represent the initial official projections of GDP growth for the financial year, published before the year concludes.
Data Exclusion: Notably, the FAE do not include formal GDP data for the third quarter (October to December), which is released with the Second Advance Estimates (SAE) at the end of February.

Election Year Context: With Lok Sabha elections due in April-May, the FAEs gain additional significance, although a full-fledged Union Budget will not be presented this year.
Budgetary Relevance: The FAE are crucial for the Union Finance Ministry’s budgetary planning for the next financial year, as the SAE are published after the budget is finalized.
Focus on Nominal GDP: For budget-making, the emphasis is on nominal GDP (the observed variable), including both its absolute level and growth rate.
Real vs. Nominal GDP: Real GDP, adjusted for inflation, is a derived metric, whereas all budget calculations commence with nominal GDP.

Real GDP Growth: The real GDP (adjusted for inflation) is expected to reach nearly Rs 172 lakh crore by March 2024.
Comparison with Modi’s Tenure: The GDP has grown from Rs 98 lakh crore at the start of Prime Minister Modi’s first term to almost Rs 140 lakh crore at the beginning of his second term.
Growth Rate Trends: The estimated 7.3% growth for 2023-24 is higher than most forecasts, indicating a strong economic recovery. However, there’s a noticeable deceleration in growth during Modi’s second term compared to the first.

Private Final Consumption Expenditure (PFCE): Accounting for almost 60% of GDP, PFCE is expected to grow by 4.4% in the current year.
Gross Fixed Capital Formation (GFCF): Investment spending, the second-largest growth engine, has grown by 9.3% this year.
Government Final Consumption Expenditure (GFCE): Government spending growth has been slower, at 3.9% in the current year.
Net Exports: The negative growth in net exports indicates a higher import-than-export rate, which has increased by 144% this year.

Private Consumption: Muted private consumption, especially in rural India, remains a concern.
Investment Spending: A significant portion of investment spending is still driven by the government, with private consumption remaining subdued.
Government Spending: Government spending growth has been relatively low in the second term of Modi’s government.
Net Exports: The negative growth in net exports, though a mild improvement over the two terms, still indicates an imbalance in trade.

Economic Recovery: The 7.3% growth rate suggests a robust economic recovery post-pandemic.
Balanced Growth: The need for balanced growth across all sectors, especially in boosting private consumption and investment, is critical for sustainable development.
Future Prospects: The ongoing economic policies and reforms will play a crucial role in shaping India’s growth trajectory in the coming years.