INDIA’S GDP (Syllabus: GS Paper 3 – Economy)

Context: Strong domestic demand driven by government capex and a continuing recovery in contact intensive services helped the Indian economy build on its growth momentum despite external headwinds in the first quarter of the current fiscal year.

Key Points

• India’s GDP growth in the quarter ending June was 7.8%, the National Statistical Office (NSO) said in a release on August 31. 
• The latest numbers are exactly in line with a projection by Bloomberg poll of economists and 1.7% points more than the 6.1% number in the previous quarter.
• Indian economy’s “growth prospects appear bright” despite downward risks from external factors such as “firming of prices of crude oil” and “prolonged geopolitical uncertainty”
• An expenditure-side analysis of the GDP numbers shows that private consumption and investment (as captured by Gross Fixed Capital Formation) numbers have played an important role in driving the growth momentum.
• A look at the sector-wise Gross Value Added (GVA) numbers shows that services played an important role in building the growth momentum during this period.
• This is likely to give a further boost to inflation for key food items such as cereals which are already at uncomfortable levels.