Q2FY25 GDP growth target was reduced to 7% from 7.2%, while Q3 was increased to 7.4% from 7.3%, Q4 raised to 7.4% from 7.2% and Q1FY26 revised upwards to 7.3% from 7.2%
“India’s growth story remains intact as its fundamental drivers – consumption and investment demand – are gaining momentum. Prospects of private consumption, the mainstay of aggregate demand, look bright on the back of improved agricultural outlook and rural demand. Sustained buoyancy in services would also support urban demand,” Das said while announcing MPC’s decision to leave the benchmark rates unchanged at 6.5 per cent yet again.
Government expenditure of the centre and the states is expected to pick up pace in line with the Budget Estimates, RBI Guv said. Investment activity would benefit from consumer and business optimism, government’s continued thrust on capex and healthy balance sheets of banks and corporates, he added.
The MPC during its August 2024 meeting had forecast India’s GDP to grow at 7.2 per cent in FY25.
India’s economy grew 8.2% in FY24, continuing to be the fastest-growing major economy in the world. However, its growth slowed to a five-quarter low of 6.7% in the April-June period of FY25 from a year earlier, as agriculture and trade-related services output eased.However, the Economic Survey, released in July 2024 ahead of the full Union Budget announcement forecast a lot more conservative growth rate of 6.5-7 per cent for the ongoing financial year on the back of global uncertainties and various domestic challenges. Brokerage major Nomura, in September, forecast India’s GDP growth to soften to 6.7% in FY25.Catch-up in government spending and rural demand are positives, but softness in consumer discretionary demand, industrial demand and external demand are negatives, it said in a report.
Meanwhile, the World Bank last month raised the growth forecast for the Indian economy for FY25 to 7% from 6.6% projected earlier, led by a recovery in the agricultural sector, private consumption and rural demand. Moody’s too has upgraded its economic growth forecast for India to 7.2% in 2024 and 6.6% in 2025, from earlier estimates of 6.8% and 6.4%, respectively, driven by broad-based growth.
What is GDP?
GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP growth rate is an important indicator of the economic performance of a country.
How is GDP measured?
It can be measured by three methods, namely:
1. Output Method: This measures the monetary or market value of all the goods and services produced within the borders of the country. In order to avoid a distorted measure of GDP due to price level changes, GDP at constant prices o real GDP is computed. GDP (as per output method) = Real GDP (GDP at constant prices) – Taxes + Subsidies.
2. Expenditure Method: This measures the total expenditure incurred by all entities on goods and services within the domestic boundaries of a country. GDP (as per expenditure method) = C + I + G + (X-IM) C: Consumption expenditure, I: Investment expenditure, G: Government spending and (X-IM): Exports minus imports, that is, net exports.
3. Income Method: It measures the total income earned by the factors of production, that is, labour and capital within the domestic boundaries of a country. GDP (as per income method) = GDP at factor cost + Taxes – Subsidies.
In India, contributions to GDP are mainly divided into 3 broad sectors – agriculture and allied services, industry and service sector. In India, GDP is measured as market prices and the base year for computation is 2011-12. GDP at market prices = GDP at factor cost + Indirect Taxes – Subsidies.