What Latest Estimates of India’s GDP Say About the Economy | Explained News
Introduction: A Closer Look at India’s Economic Growth Rate
The Indian government has recently released the latest estimates of the country’s economic growth, measured by Gross Domestic Product (GDP). This article aims to provide a comprehensive analysis of the latest GDP estimates and what they reveal about India’s economy.
GDP Growth Rate Slumps in Q2, but Recovery In Sight?
The second quarter (July, August, and September) of the current financial year (FY25) saw a sharp deceleration in India’s growth momentum, with the GDP growth rate slumping to 5.4%. This was a surprise, indicating a significant slowdown in the country’s economic growth.
Three Sets of GDP Estimates Released by the Ministry of Statistics and Programme Implementation
On Friday, the Ministry of Statistics and Programme Implementation released three sets of GDP estimates, which are:
- GDP for the third quarter (October to December) of the ongoing financial year
- GDP forecast for the full year, including the Second Advance Estimates (SAE) and the First Advance Estimates (FAE)
- GDP estimates for the preceding two financial years, including the First Revised Estimates (FRE) and the Final Estimates (FE)
Why So Many Revisions?
The Indian government releases GDP estimates for each quarter, based on initial data collection and some assumptions. However, as more data becomes available, the government updates or revises the GDP number for each quarter and, consequently, for each year. This process can lead to multiple revisions, and the latest set of estimates is the culmination of this process.
Update on GDP Growth Rates
For the third quarter (July, August, September) of the current financial year, India’s GDP grew by 6.2% (over the same quarter last year). The Ministry of Statistics and Programme Implementation has also revised the Q2 GDP growth rate from 5.4% to 5.6%. For the previous financial year (2023-24), the GDP was revised sharply from 8.2% to 9.2%. Similarly, the GDP growth rate for 2022-23 was revised up from 7% to 7.6%.
Do GDP Estimates Go Through Large Revisions?
The table below shows the GDP revisions for each of the past six financial years, providing perspective on the rate of revisions that have been brought about this time.
| Financial Year | Initial Estimate | Revised Estimate |
|---|---|---|
| FY21 | 6.8% | 7.3% |
| FY22 | 9.2% | 9.2% |
| FY23 | 7% | 7.6% |
| FY24 (preliminary) | 7.3% | 9.2% |
What Does it Mean for the Indian Economy?
GDP data provides the foundation for understanding the Indian economy. Weaker GDP data can indicate weaker tax collection for governments and lower profits for corporate India, which has implications of their own.
For instance, one of the primary reasons why Indian stock markets are being punished by foreign investors currently is the slump in corporate earnings.
Significance of Sharp Upward GDP Revision
The sharp upward GDP revision is significant, as it suggests that private consumption demand in India, which is the biggest contributor to GDP growth, had not weakened as much as previously thought.
In fact, the revision also suggests that private consumption demand had a significant uptick in the previous financial year.
Conclusion
In conclusion, the latest GDP estimates suggest that India’s economy is not as weak as previously thought. The sharp upward revision of the GDP growth rate is a positive sign, indicating that private consumption demand is driving growth. However, the economy is still facing challenges, and the government needs to address these issues to maintain a robust growth trajectory.
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