GDP Growth Slump:
- India’s projected GDP growth for 2024-25 is 6.4%, down from 8.2% in 2023-24, falling below the earlier forecast of 6.5-7%.
- Nominal GDP growth is estimated at 9.7%, lower than the 10.5% forecast in the Union Budget.
Relevance: GS 3(Economic Development)
Data Discrepancies:
- Experts highlight flaws in India’s GDP estimation, citing reliance on the volatile Wholesale Price Index (WPI) rather than the Producer Price Index (PPI), distorting real GDP calculations.
- Discrepancies between GDP by activity and GDP by expenditure complicate accurate monitoring of India’s economy.
Private Investment Issues:
- Despite tax cuts, private corporate investment remains sluggish, failing to spark the expected economic revival.
- The Union Budget’s focus on private corporate capex to fuel growth contradicts the decline in private investment observed in GDP estimates.
- The lack of private investment-led growth contrasts with the UPA era, where private investment played a significant role in boosting economic expansion.
Sectoral Slowdown:
- Data reveals a broad slowdown across sectors such as manufacturing, mining, power, and services (including retail trade, transport, and finance).
- The only sector projected to grow at a faster pace in 2024-25 is public administration, underscoring the importance of public spending in sustaining growth.
Fiscal Strain:
- Tax revenue growth has been slower than expected, with only 56% of the target achieved by November 2024, disrupting budget plans.
- The fiscal consolidation path could lead to reduced public spending, worsening the economic slowdown.
Recommendation for Revenue Mobilization:
- The current revenue strategy needs reworking, with a focus on increasing taxes on wealth and profits to boost capital expenditure (capex) and welfare spending.
Conclusion:
- A revised approach to tax policy is crucial to address the economic slowdown, especially to support capex and public welfare initiatives.
