In 2022-23 real gross domestic product (GDP) growth — which is adjusted for inflation — was at 7.2%, against 9.1% in 2021-22. This is 20 basis points higher than the Reserve Bank of India’s forecast of 7%. One basis point is a hundredth of a percent, or 0.01%. What can we make of these numbers? Mint takes a closer look.
What drove GDP growth?
GDP is the measure of the size of the economy of a country during a particular period. So, GDP growth is a measure of the country’s economic growth. One way of measuring GDP is to look at the value added by different sectors during the period, adding taxes earned on products to it, and then subtracting the subsidies on these products. The value-added part is referred to as the gross value added (GVA). The GVA forms a bulk of the GDP and in 2022-23 it grew by a good 7%. It had grown by 8.8% in 2021-22.
What drove GVA growth?
Trade, hotels, transport, communication and services related to broadcasting, which comprised just under a fifth of the GVA, grew by 14%. The construction sector, which comprised around a twelfth of the GVA, grew by 10%. Other than this, finance, real estate and professional services, which comprised around 22.5% of the GVA, grew by a decent 7.1%. The government part of the GVA, represented by public administration, defence and other services, grew by 7.2%. Other than this agriculture, forestry and fishing, the mainstay of Indian employment, comprising around 15.1% of the GVA, grew by a decent 4%, up from 3.5% in 2021-22.
Which sector did not do well?
The performance of the manufacturing sector, which comprised a little over a sixth of the GVA, was disappointing to say the least. It grew by just 1.3% against 11.1% in 2021-22. The double-digit growth in 2021-22 was because of low growth in 2020-21 and a 3% contraction in 2019-20. This is the second-slowest annual growth the sector has clocked since 1997-98.
Has the economy shaken off the impact of covid?
Not really. Real GDP in 2018-19 — the financial year before covid struck — was at ₹139.9 trillion. In 2022-23, four years later, the size of the Indian economy is expected to be ₹160 trillion. This implies economic growth of 3.4% a year on average over a four-year period, clearly showing that even though the economy is recovering, the negative impact of the pandemic is still being felt. This can be seen in the contrast between the consumption decisions of the well-to-do versus the poor.
How was GDP growth during January-March?
GDP growth for January to March was 6.1%, higher than the 4.5% growth during October to December, but lower than the 13.1% growth during April to June and 6.2% during July to September. How do things look hereon? The RBI has projected GDP growth of 6.5% for 2023-24, with growth during April to June and July to September expected to be 7.8% and 6.2%, respectively. The RBI’s forecast is more optimistic than that of the World Bank, which expects 6.3% growth.
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Updated: 31 May 2023, 08:11 PM IST
