Economy Grows 7.8%, Fastest in 4 Quarters

Context:

The growth of India’s Gross Domestic Product (GDP) and the Gross Value Added (GVA) within the economy accelerated to a four-quarter peak of 7.8% during the initial quarter of this fiscal year.

Relevance: GS3-Economy

Dimensions of the article:

• Growth across various sectors
• Gross Domestic Product (GDP)
• Gross Value Added (GVA)
• Relation between GDP and GVA
• NSO

Growth across various sectors

• Manufacturing GVA experienced its second consecutive quarter of growth, rebounding from six months of contraction. The rate of growth increased marginally to 4.7% in the first quarter (Q1) of the year, compared to 4.5% in the preceding quarter.
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• In the same period (April to June), Agriculture, forestry, and fishing GVA expanded by 3.5%.
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• However, it was the services sectors that underwent the most substantial surge, significantly boosting the estimates revealed by the National Statistical Office (NSO) on Thursday.

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) quantifies the monetary valuation of all “final” goods and services, which refers to those acquired by end-users, generated within a country during a specific timeframe.

Four Principal “Drivers of GDP Growth”:

1. The total expenditure made by Indians for their individual consumption, termed Private Final Consumption Expenditure (PFCE).
2. The aggregate funds spent by the government on its ongoing consumption, encompassing salaries and similar outlays, denoted as Government Final Consumption Expenditure (GFCE).
3. The total funds allocated towards investments aimed at enhancing the economy’s productive capacity. This includes business entities investing in facilities and government initiatives in constructing infrastructure like roads and bridges, known as Gross Fixed Capital Expenditure.
4. The net outcome of exports (money spent by foreign entities on our goods) and imports (expenditure by Indians on foreign-produced items), recognized as Net Exports (NX).

GDP Computation: GDP = private consumption + gross investment + government investment + government spending + (exports – imports)

Gross Value Added (GVA)

• Gross Value Added (GVA) is a significant economic gauge that gauges the contributions made by distinct sectors within an economy to its comprehensive economic output. It offers insights into the value generated by individual sectors prior to factoring in intermediate consumption, which involves the utilization of goods and services during the production process.
• GVA is a fundamental metric employed to evaluate the productive capacity and performance of diverse sectors. This metric plays a pivotal role in economic analysis, the formulation of policies, and comprehending the overall well-being of an economy.
• GVA is computed for every sector within an economy, spanning agriculture, industry, and services. The summation of sector-specific GVAs contributes to the Gross Domestic Product (GDP) of the nation.

Relation between GDP and GVA:

• GDP is determined based on the GVA information.
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• The connection between GDP and GVA is expressed through the equation: GDP = (GVA) + (Taxes collected by the government) — (Subsidies offered by the government).
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• Consequently, if the government’s tax earnings surpass the subsidies granted, the GDP will surpass the GVA. GDP data holds greater significance when analyzing yearly economic expansion and when comparing a country’s economic growth either with its historical progress or with another nation.

NSO (National Statistical Office):

• The NSO serves as the Statistics Division of the Ministry of Statistics and Programme Implementation within the Government of India. Functioning as the central body for the planned enhancement of the nation’s statistical framework, the NSO establishes and maintains statistical regulations and standards.
• On a monthly basis, it assembles and releases the Index of Industrial Production (IIP), conducts the Annual Survey of Industries (ASI), and furnishes statistical information for analyzing shifts in the growth, composition, and structure of the organized manufacturing sector.
• In 2017, the NSO introduced the Periodic Labour Force Survey (PLFS) recognizing the significance of having labor force data available at more frequent intervals.
• Annually, the NSO issues four quarterly updates on GDP data to facilitate observers in evaluating the prevailing condition of the Indian economy.
• Each of these releases includes information pertaining to two crucial variables within the economy: total demand and total supply.