India's Economic Growth Analysis of GDP and Sectoral Performance
Krishna Golyan
GDP: An Overview
Gross Domestic Product (GDP) is a key measure of the economic performance of a country or region, and
it is widely used by policymakers, investors, and analysts to make informed decisions about the state of
the economy. GDP represents the total value of all goods and services produced within the borders of a
country or region during a given period, usually a quarter or a year. It is a measure of the size of the
economy, and it reflects the level of economic activity and the standard of living of the people within the
country or region.
There are three approaches to measuring GDP: the production approach, the expenditure approach, and
the income approach. The production approach measures GDP as the sum of the value-added by all the
firms and industries in the economy. It calculates GDP by adding up the value of all final goods and
services produced in each sector, subtracting the value of intermediate inputs, and summing up the
value-added across all sectors. The expenditure approach measures GDP as the sum of all final goods and
services purchased by households, businesses, governments, and foreigners in the economy. It calculates
GDP by adding up consumption, investment, government spending, and net exports. The income
approach measures GDP as the sum of all the income generated by the production of goods and services
in the economy. It calculates GDP by adding up wages, profits, interest, and rent earned by households
and businesses in the economy.
The components of GDP include consumption, investment, government spending, and net exports. In the
fourth quarter of 2022, private spending accounted for 61.6% of GDP, but it slowed sharply to 2.1%,
down from 8.8% in the previous quarter, due to a rise in borrowing costs. Investment rose at a slower
pace of 8.3% compared to 9.7% in the previous quarter. Government spending contracted by -0.8%, an
improvement from -4.1% in the previous quarter. Both exports (11.3% vs 12.3%) and imports (10.9% vs
25.9%) lost steam. The stock market rebounded, growing by 0.2% compared to a decline of -2.3% in the
previous quarter.
Fluctuations in GDP over the past years:
Over the past century, India's GDP has experienced significant fluctuations, influenced by a variety of
factors such as government policies, international events, and domestic issues. India's GDP growth was
relatively stable during the first few decades of the 20th century, with an average growth rate of around
3% per year. However, the country's GDP took a significant hit during World War II, with growth rates
dropping to negative levels. Following independence in 1947, India's economy underwent significant
changes as the government pursued a policy of state-led development. This led to a period of rapid growth
in the 1950s and 1960s, with GDP increasing by an average of 4.5% per year. However, the 1970s saw a
significant downturn in the economy, with GDP growth falling to just 1.5% per year. In the 1980s, the
government implemented economic reforms aimed at liberalizing the economy, which led to a period of
rapid growth in the 1990s. GDP growth rates averaged around 7% per year during this period. However,
the early 2000s saw a slowdown in growth, with average growth rates falling to around 4% per year .In
recent years, India's GDP growth has fluctuated significantly. In 2016-17, the country's GDP growth rate
was 8.2%, the highest in a decade. However, this growth rate fell to just 4.2% in 2019-20, due to a
combination of factors including a slowdown in domestic demand, trade tensions, and the COVID-19
pandemic.
GDP fluctuations in India over time Source: (mospi.gov.in)
Sectoral Analysis of India’s GDP:
The sectoral analysis of India's GDP growth shows that the agriculture, construction, and mining sectors
grew, while the manufacturing sector shrank for a second time. The agriculture sector grew at a faster
pace of 3.7% compared to 2.4% in the previous quarter. The construction sector grew at a faster pace of
8.4% compared to 5.8% in the previous quarter. Finally, the mining sector grew at a faster pace of 3.7%
compared to -0.4% in the previous quarter. On the other hand, the manufacturing sector shrank for the
second time by -1.1% compared to -3.6% in the previous quarter. The finance and real estate sector grew
at a slower pace of 5.8% compared to 7.1% in the previous quarter. The trade, hotels, transport, and
communication sector grew at a slower pace of 9.7% compared to 15.6% in the previous quarter.
Source: India GDP sector-wise 2021 - StatisticsTimes.com
These statistics shows a mixed performance across various sectors. The agriculture sector recorded strong
growth, likely due to favourable weather conditions and government support. Construction also showed
positive growth, reflecting the ongoing infrastructure development projects in the country. However, the
manufacturing sector recorded a decline, possibly due to supply chain disruptions and high input costs.
The decrease in GDP from utilities can be attributed to a drop in electricity demand during the quarter.
Looking at the overall trend, India's Gross National Product has been steadily increasing in recent years,
with the Trading Economics global macro models and analyst expectations predicting continued growth
in the long-term.
Conclusion:
In conclusion, the Indian economy has shown significant fluctuations in its GDP and GNP over the past
few years. Despite facing several challenges, such as the COVID-19 pandemic and the economic
slowdown, the country's agriculture and construction sectors have seen positive growth, while the
manufacturing and utility sectors have experienced a decline. The government's focus on digitalization,
innovation, and infrastructure development, coupled with favourable policies, has led to a boost in public
administration and mining sectors. Moreover, the country's Gross National Income is projected to
increase over the long-term, which is a positive sign for the economy.
However, the country still faces several challenges, such as high unemployment rates, income inequality,
and a significant informal sector, which hinder the growth of the economy. Addressing these issues
requires a comprehensive and sustained effort from the government, private sector, and civil society.
Furthermore, India's dependence on agriculture remains significant, and a boost in productivity and
investment in the sector is crucial to reduce poverty and create job opportunities in rural areas. Overall,
the Indian economy has shown resilience and adaptability to overcome several challenges, and with the
right policies and investments, it can continue to grow and develop in the future.
References:
India Indicators (tradingeconomics.com)
Finance & economics | The Economist
Gross Domestic Product (GDP) | Definition, Types, and Balance (financestrategists.com)
MONTHLY ECONOMIC REPORT | Department of Economic Affairs | Ministry of Finance | Government of
India (dea.gov.in)
India Economic Snapshot - OECD