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India’s growth prospects for this year UPSC NOTE

 The Story So Far

  • NSO's GDP Estimate: India’s GDP grew 8.2% in 2023-24, surpassing all economic forecasts and NSO's advance estimates of 7.6%.

  • Quarterly Growth: The January to March 2024 quarter saw a 5.9% rise, updated to 7.8%, slower than the previous quarter's 8.6% growth.

  • Private Consumption: Slightly improved but still weak, impacting the revival of industrial investments.

Growth Prospects for 2024-25

  • RBI's Projection: The RBI projects 7.2% GDP growth for 2024-25, up from an earlier 7% estimate.

  • Inflation: Expected to drop to 4.5% from 5.4%.

  • Industrial output growth slowed to 5% in April.

  • GST collections hit a high of over ₹2 lakh crore in April but slowed to just under 10% growth in May.

Economists' Views:

  • Bank of Baroda estimates 7.3%-7.4% GDP growth.

  • CRISIL estimates 6.8% GDP growth.

  • Heat waves and a projected above-normal monsoon could influence economic performance.


Impact of Coalition Government on Economy and Reforms

  • Political Continuity: Prime Minister Narendra Modi returned to office with a coalition government.

  • Key ministers like Nirmala Sitharaman and Piyush Goyal retained their portfolios.


Economic Outlook: 

  • Fitch Ratings expects strong medium-term growth due to government capex and improved corporate/bank balance sheets.

  • Challenges include pushing contentious reforms (land and labor) due to coalition dynamics.

  • Moody’s is less optimistic, citing potential delays in reforms and fiscal consolidation.

Expectations for the Full-Year Union Budget

  • Finance Ministry's Focus: Continuing reforms to bolster macroeconomic stability and growth.

  • Budget Consultations: Will involve industry and stakeholders.

  • Key Areas to Address: 

    • Inflation control

    • Boosting consumption and investments

    • Resolving taxation issues affecting MSMEs

  • GST Council Meeting: Expected to discuss tax regime rationalization.

  • Manufacturing Focus: Initiatives to integrate Indian manufacturing into global value chains, potentially reducing import tariffs.

  • Regional Demands: BJP allies may seek specific measures for Andhra Pradesh and Bihar.

  • Long-term Vision: The Budget will outline plans to make India a developed nation by 2047, based on Niti Aayog's blueprint.

Historical Context

  • Effective Coalitions: Past coalitions have successfully implemented critical reforms, such as the privatisation drive by the Atal Bihari Vajpayee government. 

  • This Budget could reveal the coalition government's approach to continuing the reform agenda.

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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: India’s growth prospects for this year UPSC NOTE
India’s growth prospects for this year UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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