Economy
Explained: What drove India's GDP growth in FY23?
Summary
GVA forms a bulk of GDP and in 2022-23 this grew by a good 7%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%. What can we make of these numbers? Mint examines:
What has driven GDP growth?
GDP is the measure of the size of the economy 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, adding taxes earned on products to it and then subtracting the subsidies on these products. Value added is referred to as gross value added (GVA). GVA forms a bulk of GDP and in 2022-23 this grew by a good 7%. It had grown by 8.8% in 2021-22. The difference between taxes earned and subsidies given on products grew by 10.1%—more than the GVA growth of 7%—and helped GDP grow by 7.2%.
What drove GVA growth?
Trade, hotels, transport, communication and services related to broadcasting, which formed a little under a fifth of GVA, grew by 14%. The construction sector, which formed around a twelfth of GVA, grew by 10%. Finance, real estate and professional services, which formed around 22.5% of GVA, grew by a decent 7.1%. The government part of the GVA represented by public administration, defence and other services grew 7.2%. Agriculture, forestry and fishing, the mainstay of employment, which formed 15.1% of GVA, grew by 4%, against 3.5% in 2021-22.
Which sector did not do well?
Manufacturing, which formed a little over a sixth of the GVA, disappointed. It grew by just 1.3% against the 11.1% in 2021-22. In fact, the double-digit growth in 2021-22 was because of low growth in 2020-21 and a contraction in 2019-20. Still, this is the second slowest annual growth seen in manufacturing since 1997-98. The sector had contracted by 3% in 2019-20.
Has the economy seen off covid’s impact?
Not really. Real GDP in 2018-19—the financial year before the pandemic—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 an economic growth of 3.4% per year on average over these four years, 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 being made by the well-to-do vis-a-vis the poor.
How was GDP growth in January-March?
GDP growth for January to March was 6.1%, higher than the growth of 4.5% 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 a GDP growth of 6.5% for 2023-24, with the growth during April to June and July to September expected to be at 7.8% and 6.2%, respectively. The RBI’s forecast is more optimistic than that of World Bank which expects a growth of 6.3% during 2023-24.
