False
Download Learnerz IAS app from the Play Store now! Download

$show=search/label/May%202022

 


Tracking India’s Growth Trajectory UPSC NOTE

 Complexities and nuances involved in assessing India's economic situation

  • The conventional way to assess a country’s economic situation is to look at the quarterly (three-month) and annual (12-month) GDP (gross-domestic-product) growth rate and compare it to previous quarters as well as years.

Calculating GDP:

  • The first factor to consider is that calculating the GDP growth rate involves many complex statistical choices and sophisticated statistical operations.

  • One such decision the NSO made while conducting their research was to use the income approach of calculating GDP rather than the expenditure approach. 

  • The income approach involves summing up all national incomes from the factors of production and accounting for other elements such as taxes, depreciation, and net foreign factor income. 

  • The assumption generally is that both methods lead to similar results.

  • For instance, the Q1 data covering the GDP growth rate from April to June of FY24 is 7.8%.

  • However, the expenditure approach dictates headline growth to be 4.5% rather than 7.8% which is a large discrepancy. 

  • Moreover, another essential statistical operation is the adjusting for inflation using the price deflator. 

  • Typically, the deflator is meant to adjust growth figures when they are overstated by inflation. 

  • In this case, deflation due to falling commodity prices, reflected in the wholesale price index, has worked to overstate the real growth.

  • Furthermore, there is a base effect from the COVID-19 degrowth period, which continues to plague India’s growth figures. 

  • Although less pronounced in FY24, the base effect has a role in comparative statistics due to sporadic growth in the years following FY20-21.

  • Additionally, one must consider whether the proposed, supposedly cooled, inflation rate calculated through the consumer price index can be sustained at current levels with the impending depreciation of the Indian rupee against the dollar due to capital outflow pressures resulting from the RBI’s reluctance to raise interest rates.

  • India is a net importer, and its most significant import consists of crude petroleum, whose price seems to be rising due to Saudi’s $100 per barrel push and rupee depreciation. 

  • The domestic consumption of diesel, a proxy for economic activity in India, fell by 3% in August, which, if sustained, does not paint a rosy growth picture for the coming quarters.

Revenue from taxes:

  • The government’s tax revenue from direct taxes has weakened over the previous quarter while the indirect tax revenue remained strong, indicating a K-shaped pattern. 

  • The income streams from progressive taxation (more significant tax burden on those higher on the income ladder) seem to be a backward compared to its regressive counterpart. 

  • A muted growth of direct tax collected in an economy boosted by the services industry is a statistical discrepancy which remains unexplained in the proposed GDP growth story. 

  • Direct and personal taxes should (in the absence of any significant policy changes) have grown closer to the nominal growth rate than it has currently. 

  • Narrowing revenue streams indicate forced austerity measures, as the government intends to control the budget deficit, and hence the interest rate. 

  • Therefore, growth in FY24 stemming from government expenditure seems to be a pipe dream.

Conclusion:

  • In conclusion, after a meticulous analysis of India’s Q1 FY24 economic transcript, it becomes palpable that the reported growth narrative might be somewhat over embellished. 

  • The divergence in growth figures brought forth by the income and expenditure approaches manifest a significant disparity, raising fundamental questions about the veracity of the promulgated optimistic narrative. 

  • Moreover, the underpinnings of this growth story, nuanced by inflationary adjustments and conspicuous fluctuations in tax revenue streams, signal a cautious trajectory. 

  • Additionally, the apprehensive outlook on the agriculture sector and potential fiscal constraints paint an arguably more restrained picture than initially portrayed. 

  • Therefore, it seems prudent to assert that India’s economic performance, although showing signs of resilience, does not quite emerge as the unequivocal success story depicted in initial observations, urging a more nuanced and critical approach in assessing the trajectory ahead.

COMMENTS

Name

Amritsar,1,April 2024,301,Art & Culture,1,August 2023,251,Courses,7,Daily Current Affairs,48,December 2023,189,Disaster Management,2,Environment and Ecology,193,February 2024,228,Foundation Course,1,GDP,1,GEMS Club,1,GEMS Plus,1,Geography,191,Govt Schemes,2,GS 2,1,GS1,6,GS2,68,GS3,26,GST,1,History,11,Home,3,IAS Booklist,1,Important News,71,Indian Economy,173,Indian History,10,Indian Polity,202,International Organisation,12,International Relations,143,Invasive Plant,1,January 2024,240,July 2023,281,July 2024,230,June 2022,6,June 2023,268,June 2024,324,March 2024,238,May 2022,17,May 2024,330,Mentorship,2,November 2023,169,October 2023,203,Places in News,2,Science & Technology,135,Science and Technology,95,September 2023,205,UPSC CSE,111,
ltr
item
Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Tracking India’s Growth Trajectory UPSC NOTE
Tracking India’s Growth Trajectory UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
https://www.learnerz.in/2023/09/tracking-indias-growth-trajectory-upsc.html
https://www.learnerz.in/
https://www.learnerz.in/
https://www.learnerz.in/2023/09/tracking-indias-growth-trajectory-upsc.html
true
4761292069385420868
UTF-8
Loaded All Posts Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy Table of Content