India’s annual economic growth surged to a more than two-year high of 8.2 percent in the three months through June, giving Prime Minister Narendra Modi’s government a political boost in the final year of his term before elections. PM Modi has however, been under pressure to make good his promise to deliver reforms and provide jobs to millions of youth entering the workforce each year as he faces a clutch of state elections this year followed by his planned re-election uphead in 2019.
GDP is a broad measurement of a nation’s overall economic activities. It is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. The term constitutes nation’s all private and public consumption, government outlays, investments, private inventories, paid-in construction costs and the foreign balance of trade, citing the increased exports amidst the imports.
As per the RBI’s recently released data, India under Vajpayee achieved a higher GDP growth rate of 8.1% in 2003-04. However, this growth momentum could not be maintained by the UPA Government, as when it left the government in May 2014, the GDP growth rate was around 6.4% only. Resurging since 2014, Indian economy is again on the high growth trajectory of around 8% as the data for quarter one of 2018-19 reflects.
There are three primary methods by which GDP can be determined. Although the result coequals, these three approaches are termed as the expenditure approach, the production approach and the income approach. The fluctuation of the is noticed because of the business cycle. When the economy is booming and GDP is rising, there comes a point when inflationary pressures build up rapidly as labour and productive capacity near full utilization.
GDP is one of the most common indicators used to measure country’s economic health. India’s economy grew at an impressive 8.2 per cent in the first quarter of 2018-19 financial year ending June 30 on the back of a strong core performance and a healthy base. There are, of course, drawbacks to using GDP as an indicator.
With the increase in the interest rates, companies and consumers cut back their spending, and the economy slows down. Slowing demand leads companies to lay off employees, which further affects consumer confidence and demand. To break this vicious circle, the central bank then eases monetary policy to stimulate economic growth and employment until the economy is booming once again. The reason being consumer spending and business investment form another critical component of GDP, since it increases productive capacity and boosts employment.
The GDP measure does not account for several unofficial income sources as it relies on official data and does not consider the extent of the underground economy, which can be significant in some nations. Also It is an imperfect measure as it does not take into account profits earned in a nation by overseas companies that are remitted back to foreign investors. This can overstate a country’s actual economic output.
The national income and product accounts (NIPA), which form the basis for measuring GDP, allow policymakers, economists and business to analyze the impact of such variables as monetary and fiscal policy, economic shocks such as projections in oil prices, tax and spending plans on the overall economy. With the end of the Modi term, it will be interesting to note the fluctuations in the nation with the prudent political, social and economical changes.