GROSS DOMESTIC PRODUCT( GDP )GROWTH:IMPLICATIONS OF Q2 SHOCKER

Since 2013 except for the Covid19 period,India, witnessed relatively high GDP growth rate of  6.39% in 2013 to 7.41% in2024,8.00% in 2015,8.26 % in 2016 6.80%,in 2017 6.45 % in 2018,3.74% in 2019 and minus (-) 10.33 % GDP growth reported due to Covid19 impact in 2020. Afterwards Fy 2021 witnessed 8.68% growth 2022 7% and in 2023  8.68% growth. Analysts advocated that high growth rate reported in the previous years were largely due to vibrant infrastructure development  policies focusing on manufacturing sector like 'making India program' launched in 2014 followed by Atmanirbhar Bharat, Production Linked Incentive (PLI) scheme, Digital revolution, incentives for MSME'S, Startups, electronics , automobiles, defense equipments,space products and semiconductors etc.For the financial year 2024-25 both national and international agencies predicted very robust growth for India being the fastest growing economy of the world. Accordingly Reserve Bank of India itself projected 7.2% growth for the period 2024-25.While IMF World Bank and Asian Development Bank and Fitch projected 7% growth ,Moodys projected 7.2 %SBI projected 7.1%.The assumptions made to reach their projected growth include- trade should increase, both innovation and productivity of workers must increase. To reach projected growth IMF anticipated increase in private consumption expenditure especially in rural areas and insisted on implementation of labour codes ,educational reform,private investment, changes in taxation and reduction in tarrifs etc.

Q2  SHOCKER 

As per NSO 's recent Data  India's real GDP growth for Q2 slumped to a seven quarter low of 5.4% during the period of July- September 2024-25 as against the Q2 figure of 8.1% in the same period last year 2023-24. This was due to deceleration in many sectors excluding agriculture and service sectors which performed relatively better. Performance of manufacturing sector that achieved 14.3 % growth in Q2 of 2023-24 slumped to just 2.2 % growth in Q2 2024-25. .Similarly electricity, Gas,water supply and other utility services recorded only 3.3% now compared to 10.5% last year.Another disappointment is the stagnant growth of trade,transport hotels and construction sector. On the contrary in case of public administration, Defence and other services Goss Value Added ( GVA) has increased from 7.7% last year to 9.2 % in Q2 of this year,Similarly private final consumption expenditure has increased from 2.6% Q2 last year  to 6% in Q2 2024-25. In any case the Q2 shocker of 5.4 % growth is bound affect adversely the quest for 7 % GDP growth in 2024-25. It has been observed that ecven to attain the level of 6.5% GDP annually for the year 2024-25 GDP must grow 7% in Q3 and Q4  respectively which might be possible. 

POLICY IMPLICATIONS 

Reserve Bank of India (RBI) has been following an hawkish monetary policy focussing more on controlling inflation than growth.Even before the release of Q2 figures by NSO there were frequent observations made  by concerned Cabinet Ministers about the need to cut interest rates in oder to stimulate demand and infuse liquidity so as to ensure credit flows to the system. It may be noted here that the festival season has not evoked much demand and urban demand was lagging. Hence a reduction in repo rate is expected to revive urban sector further.Our service sector exports continued to be optimistic Whereas growth of merchandise exports largely depend on tariffs at the prevailing geopolitical conditions. Some experts observed that anticipated US tariff wall with China and US  friendly relations with India(and the stand that India is not for dedolarisation)can boost Indian goods exports  to US and impact GDP growth of  the economy . Moreover along with Capital expenditure of  both Central and state Governments it is high time that private sector increasingly invest in infrastructre development projects both  under private  sector or under public private partnership which can bring greater impact on India's GDP growth. 

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