India GDP Growth Rate: Breaking Down the Numbers

In India, the GDP growth rate reflects the variation in the adjusted value of both goods as well as services, generated through the country’s economy during a period. India being one of the strongest economies in the world,  has been on a move towards both upward and downward directions, as India’s GDP growth rate is concerned, in the past years, as for pre and post-pandemic scenarios. While the service industry has been the most significant and fastest expanding sector of the Indian economy in the mentioned period. 

India GDP: 5th Largest Economy

If we talk about the numbers in varied sectors in the country, then, trade, hotels, transportation, and communication; finance, insurance, real estate, etc. account for more than 60% of GDP. Meanwhile, agriculture, forestry, and fisheries account for around 12% of total output but the employment rate in these sectors accounts for more than 50% of the working force. Manufacturing contributes to about 15% of GDP, construction around 8%, and mining, quarrying, power, gas, and water delivery for the remaining 5%. 

Let us explore the status of India’s GDP growth rate as we discuss the past year's trends and the factors contributing to the same. 

Summary in Brief

• Learn about the current status of India GDP growth rate quarterly from April-June 2022
• Understanding about the past year trends through India GDP growth rate in 10 years
• Discussion of the Factors that influence India GDP growth rate
• Identifying where India GDP growth rate is leading by the year 2024

India’s GDP Growth Rate Quarterly From April-June 2022

India's GDP figures for the April-June quarter in the current financial year 2022-23 have increased by double digits but lately have fallen short of experts' expectations. According to the  preliminary estimates that have been issued by the National Statistical Office recently, India's GDP increased by 13.5% as of the current quarter. India's GDP grew by 20.1 percent in the previous fiscal years in the same period. The manufacturing sector increased at 4.8 percent in April-June, compared to 49 percent in the last financial year of 2021-22, while the mining industry grew at 6.5 percent, compared to 18 percent in that year.

However, if we analyze the independent government figures, the central government's budget deficit has reached to about 20.5 percent of the annual objective at the end of July 2022-23, that is straight up from 21.3 percent the previous year, indicating improved public financing. Furthermore, as financing is concerned, during the April-July period of this fiscal year, the fiscal deficit i.e. the gap between expenditure and revenue was about Rs 3,40,831 crore. A fiscal deficit is a reflection of the government's market borrowings and has a major impact on the GDP growth rate of a country. Let us see how such factors have contributed in the past year trends of India’s GDP growth rate and analyze the same.

India’s GDP Growth Rate in the Past 10 years (2012-2021)

Source: World Bank

If we look at the past 10 year trends for the GDP growth rate in India, we can gauge that India’s GDP growth rate has been a factor of both country’s internal decisions as well as extrinsic global factors. India;s GDP growth rate in 2012 stood at 5.5% which kept growing until 2017. The decreasing trend continued till the GDP reached negative as for India’s GDP growth rate 2020 is concerned, the obvious reasons were unmanageable fiscal deficit, economic disparity, government and political turbulence and of course the unprecedented COVID 19 pandemic of 2020. However, the post-pandemic scenario has been a positive end to the light for the country in the year 2021, where the India GDP growth rate 2021, took a complete u-turn with a rise of 8.9% where many sectors, specifically healthcare has been a major contributing factor.

Let us now analyze what factors have been contributing to India’s GDP growth rate in these past years as well as until very recently as the post-pandemic scenario is concerned .

Factors that Have Influenced India’s GDP Growth Rate

In recent years, there has been a shift in economic power and focus to the growing economies of the BRIC countries: Brazil, Russia, India, and China. The BRIC nations' GDP growth rate is significantly higher than that of historically strong economies such as the United States and Germany. While the United States has the world's largest economy by practically any measure, China has the second-highest percentage of global GDP, with India racing Japan for third place. 

Despite the global crisis in 2008 and 2009, India managed to maintain outstanding GDP growth rates, especially given that the majority of the globe saw a decreasing trend in at least one of these years. 

So let us analyze what are the factors that have recently been contributing to the roller-coaster growth of India’s GDP. 

• The Healthcare Sector: As a result of the pandemic, India has emerged as a global leader in vaccine production. Vaccine production has begun on a wide scale in several areas of India, resulting in increased export to other nations and, as a result, an increase in India's GDP.
• Boom in the Investment Business: Personal and private investment is the most important factor influencing India's GDP. As the economy's unknown risks have eventually been known to decrease, Indian firms have become an appealing host into investment both in the host locally as well as internationally.

So where is the problem that somewhere pulls back the GDP growth rate in India? Inflation!

In India, inflation has been rising in recent months. Everyone initially assumed it was due to supply-side concerns created by the lockout, as demand was definitely subdued. However, despite the fact that supply-side concerns and transportation constraints have already been addressed, inflation remains higher than the objective, and even exceeds the RBI's target band. Higher inflation, particularly in food, not only reduces the purchasing power of the poor, but also increases business instability.

Where is India’s GDP growth rate leading to in the Coming Years?

As per the reports analyzed by Statista, the India GDP growth rate for the year 2022 i.e. by the end of the current financial year is projected to be 7.8%, even after the surge in prices, the experts predict a positive end to the fiscal year. However, for FY 2023-24, the GDP is predicted to fall down to 6.8% and eventually see a rise in 2024-25 with a growth rate of 7.04%. The predicted analysis could be the factor of the post recession recovery across the globe that is likely to affect India’s GDP growth rate in the short term. 

But if we also look at the RBI’s report, the central bank maintained its GDP prediction of 7.2 percent for the current fiscal year during its monetary policy meeting earlier in August 2022. It forecasts growth of 6.2 percent in the second quarter, 4.1 percent in the third quarter, and 4.0 percent in the fourth quarter, with risks largely balanced. The real GDP growth rate for the first quarter of the next fiscal year (2023-24) is expected to be approximately 6.7%. The central bank also warned that there might be increased risks as a result of prolonged geopolitical tensions and excessive volatility in the financial market, which could lead to tight financial conditions. All of these issues may impact India's GDP growth rates in the future quarters.

Part of the reason for India's positive ride in the economic front up till now, is the economic liberalization that began in 1991 and stimulated commerce, eventually leading to the elimination of several public monopolies. However it cannot be ignored that the inflationary pressures have however hindered GDP growth in recent years. But again on the positive side, India's workforce is rising in the manufacturing and service sectors, thanks in part to overseas outsourcing, which is a successful business for the Indian economy. Apart from China, India's agriculture industry is a worldwide powerhouse, producing more wheat and tea than any other country, across the globe. Although, due to the automation of many processes and India's fast rising population, the country's unemployment rate still remains very high. It would be interesting to find out how the country caters to its weaknesses and mobilizes the strength to accentuate its GDP growth rate in the coming years.