From UPSC perspective, the following things are important :
Prelims level: Credit rating agencies
Mains level: How to ensure the benefits of high growth trickle down to the lower income categories?
Why in the news?
The release of India’s GDP data was eagerly anticipated, especially following the recent upgrade in the “sovereign rating outlook” by S&P. It comes just days before the announcement of the union election results.
Back2Basics: Rating Agency
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What does the data say?
- India’s GDP growth for 2023-24 is 8.2%, exceeding market expectations and surpassing the previous year’s growth of 7%.
- Fourth-quarter growth is particularly robust at 7.8%, with upward revisions in previous quarters contributing to overall growth.
- Notable divergence of 1 percentage point between GDP and GVA growth in 2023-24, mainly due to increased net taxes.
- Sectoral analysis reveals mixed performance, with manufacturing and construction showing strong growth, while agriculture remains subdued.
- Expenditure-side breakdown highlights a slower growth rate in private consumption but healthy growth in investment, led mainly by government spending.
Pillars need to be sustained:
- Private Consumption: Ensuring sustained consumer spending, particularly by addressing high inflation and low wage growth, to maintain economic momentum.
- Investment: Continuously stimulating both government and private sector investment to drive economic expansion and foster innovation and productivity.
- Exports: Maintaining competitiveness in global markets and promoting export-oriented growth to leverage external demand and diversify revenue sources.
How to ensure the benefits of high growth trickle down to the lower-income categories?
- Improving Private Consumption: Focus on reviving private consumption, especially among lower-income groups. Address concerns of high inflation and low wage growth affecting consumer confidence.
- Enhancing Employment Opportunities: Prioritize improving the employment scenario, particularly in sectors generating significant employment like IT and the unorganized sector. Recognize the importance of employment in sustaining consumption growth and overall economic stability.
- Investment in Rural Development: Ensure spatial and temporal distribution of rainfall for rural demand recovery. Moderating food inflation and improving employment conditions crucial for rural consumption revival.
- Boosting Private Capex Cycle: Create an environment conducive to private investment, focusing on policy certainty and confidence in economic stability. Encourage private sector investment through favourable policies and supportive regulatory frameworks.
- Policy Focus on Inclusive Growth: Direct policy attention towards ensuring that the benefits of high growth extend to lower-income categories. Implement targeted social welfare programs and initiatives to support vulnerable groups and reduce income inequality.
- Monitoring Global Developments: Stay vigilant of global economic trends and developments that could impact the Indian economy, such as geopolitical tensions and supply shocks. Adapt policies accordingly to mitigate risks and capitalize on opportunities for sustained economic growth.
Conclusion: The Indian government aims to bolster equitable growth through measures such as stimulating private consumption, enhancing employment prospects, and fostering a conducive investment environment, supported by targeted policies and proactive global monitoring.
Mains PYQ:
Q Explain the difference between the computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC IAS/2021)
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