GDP of India, Know about Gross Domestic Product of India

Why GDP of India in News?

• India has achieved a big economic milestone by crossing the $4 trillion mark in its Gross Domestic Product (GDP), showing strong economic growth and making it a major global economic player.
• The Reserve Bank of India (RBI) shared in its November report that the GDP growth in the second quarter was better than expected, beating the initial forecast of 6.5%. Early signs and good results from businesses in September also support this positive news.
• Important groups like S&P Global Ratings and Morgan Stanley Research predict that India’s economy will grow well in the next few years. S&P thinks the GDP will grow by 6-7.1% every year until 2026, and Morgan Stanley expects around 6.5% growth for the fiscal years 2024 and 2025. These predictions highlight India’s strong economy at home and its ability to face challenges in the global economy.
• Moody’s Investor Services keeps its prediction for India’s growth at 6.7% for 2023, mentioning strong demand within the country and its ability to stay strong even when the world economy slows down. Similarly, the International Monetary Fund (IMF) has increased its guess for India’s growth to 6.3% for 2023-24, recognizing that India consumed more than expected in the first quarter. The RBI also thinks India’s growth will be 6.5% in the fiscal year 2024.

GDP of India

• India’s economic performance in the previous year was impressive, achieving a GDP growth rate of 7%, showcasing its robust economic health.
• In contrast, the World Bank projects a global economic expansion of only 1.7% this year, marking the third-lowest growth rate in nearly three decades.
• China, a major economic player, reported a growth rate that fell notably short of its official target of 5.5%, representing the weakest growth in its modern history.
• India’s Gross Domestic Product (GDP) is a crucial indicator of its economic well-being, and as one of the world’s largest and fastest-growing economies, it consistently garners attention for its substantial GDP figures.
• The diverse economic landscape, including sectors like information technology, agriculture, and manufacturing, contributes to the dynamic nature of India’s GDP.
• India’s economic resilience and adaptability are evident in its consistent growth rates over the years, reflecting its ability to navigate global economic trends.
• With a strategic focus on economic reforms, infrastructure development, and technological advancements, India continues to shape its GDP trajectory, positioning itself as a significant player on the international economic stage.

What is GDP?

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period within a country or country. GDP is the most commonly used measure of the economy’s size and growth. It can be used to compare the relative economic performance of different countries over time or across countries at a single point in time.

There are three main ways to calculate GDP:

1. The expenditure approach: This approach measures the total spending on final goods and services produced in the economy. It includes spending by households on consumption goods, spending by businesses on investment goods, government spending on goods and services, and spending by foreigners on domestically produced goods and services (exports).
2. The income approach: This approach measures the total income earned in the economy. It includes the wages and salaries paid to workers, the profits earned by businesses, the interest earned on loans, and the rent earned on land and buildings.
3. The production approach: This approach measures the total value added at each stage of production in the economy. It includes the value added by farmers, manufacturers, wholesalers, retailers, and other businesses that transform raw materials into finished goods and services.

GDP is typically measured in local currency. However, it can also be converted into other currencies using exchange rates. GDP is usually expressed in billions or trillions of units of currency. GDP is a useful tool for economists and policymakers because it provides a comprehensive measure of economic activity. It can be used to track the overall health of the economy, identify areas of strength and weakness, and make informed decisions about economic policy.

However, GDP has some limitations as a measure of economic well-being. It does not take into account factors such as the distribution of income, the quality of life, or the environment. It can also be affected by fluctuations in prices and exchange rates. Despite its limitations, GDP is an important economic indicator that is used by governments, businesses, and individuals around the world. It provides a valuable snapshot of the overall health of an economy and can be used to track trends over time.

Here are some of the uses of GDP:

• Measure of economic growth: GDP is often used to measure the rate of economic growth over a period of time. This can be done by comparing the GDP of a country or region in two different years. A positive GDP growth rate indicates that the economy is expanding, while a negative GDP growth rate indicates that the economy is contracting.
• Benchmark for economic performance: GDP is often used as a benchmark for economic performance. Countries and regions around the world strive to achieve a certain level of GDP per capita, which is often considered a measure of a country’s standard of living.
• Indicator of economic policy: Governments and policymakers use GDP data to assess the effectiveness of economic policies. For example, if a government is trying to stimulate economic growth, it will look for signs of an increase in GDP.
• Tool for financial analysis: Businesses and investors use GDP data to make informed decisions about investments and loans. For example, a business may invest in a new product or service if it believes that the economy is growing.
• Measure of economic health: GDP is often used as a general measure of the health of an economy. A strong GDP is often seen as a sign of a healthy economy, while a weak GDP can be a sign of an economy that is struggling.

GDP is a complex and multifaceted concept, but it is a powerful tool that can be used to measure and understand economic activity.

Growth in GDP of India

• India’s economy expanded by 4.4% in the most recent fiscal quarter, a decrease from the previous quarter’s 6.3% growth.
• Analysts had expected a figure closer to 4.6% for the quarter.
• Despite the quarterly dip, India boasted an impressive average yearly GDP growth of over 7% last year, placing it among the best-performing economies globally.
• In contrast, the World Bank projects global economic growth at only 1.7% this year, marking the third-lowest rate in almost three decades.
• India’s economy showed resilience despite inflationary pressures, with a retail inflation rate of 6.52% in January, exceeding the Reserve Bank of India’s target of 6%.
• In response to inflation, the Indian central bank increased interest rates by a quarter of a percent last month, bringing them to 6.5%.

GDP of India: Economy of India

India’s economy has undergone a change from a mixed planned economy to a mixed middle-income emerging social market economy with significant state intervention in key industries. By nominal GDP, it is the fifth-largest economy in the world, and by purchasing power parity, it is the third-largest (PPP).

India ranked 125th by nominal GDP and 142nd by nominal GDP in terms of per capita income, respectively, according to the International Monetary Fund (IMF) (PPP). From the time of independence in 1947 until 1991, many governments adopted a planned economy in the manner of the Soviet Union, encouraged protectionist economic practices, and engaged in substantial state intervention and economic control. The License Raj is considered to be a kind of dirigism.

GDP of India Post LPG Reforms

The adoption of comprehensive economic liberalization in India was prompted by the end of the Cold War and a severe balance of payments crisis in 1991. Annual GDP growth has ranged from 6% to 7% on average since the turn of the century.

Up to the beginning of colonialism in the early 19th century, the Indian subcontinent had the largest economy in the world during the majority of history that is known. In nominal terms, India’s contribution to the global economy in 2022 was about 3.4% and 7.2%, respectively, in PPP terms.

GDP of India Growth amid COVID-19

• India’s domestic economies are still mostly unregulated; COVID-19 reversed economic progress and poverty reduction; inadequacies in loan access led to lower private spending and inflation; and new initiatives for social and infrastructure justice.
• Due to the shocks of “demonetization” in 2016 and the implementation of the Goods and Services Tax in 2017, economic growth slowed down.
• India’s Economy is mostly driven by domestic spending, at over 70%. The nation continues to be the sixth-largest consumer market in the globe.
• The GDP of India is supported by government expenditure, investments, and exports in addition to private consumption. India was the 10th-largest importer and the 18th-largest exporter in the world in 2022.
• Since 1 January 1995, India has belonged to the World Trade Organization.
• It comes in at number 68 on the Global Competitiveness Report and number 63 on the Ease of Doing Business index.

Due to the enormous variations in the rupee/dollar exchange rate, the nominal GDP of India also varies greatly. India has the second-largest labour force in the world, with 476 million employees. India is among the countries with the largest percentage of billionaires and the greatest income disparity. Just 2% of Indians pay income taxes due to several exclusions.

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