Gross Domestic Product (GDP) is calculated by summing up several key components: private consumption expenditure, investment, government expenditure, and net exports. For the first quarter (Q1), GDP was reported at ₹40.4 trillion, marking a 7.8% increase compared to the previous year. This growth has been significantly influenced by the base effect, which refers to the lower GDP figures from Q1 2020 due to the pandemic-induced lockdown.
When examining real GDP, which is adjusted for inflation, it has shown an average growth rate of 3.2% per year from 2019-20 to 2023-24. This trend indicates that the economy continues to recover from the adverse effects of the COVID-19 pandemic. Notably, private consumption expenditure, a critical component of GDP, has increased at an average rate of 3.6% annually during this timeframe.
The primary distinction between real GDP and nominal GDP lies in the consideration of inflation. Real GDP accounts for inflation by subtracting it from nominal growth figures. In Q1, real GDP growth was recorded at 7.8%, while nominal GDP growth stood at 8%. This difference arises because the GDP deflator, which gauges the impact of inflation on GDP, was nearly at 0%, attributed to declining wholesale prices, even as retail prices experienced an increase.
Several sectors have shown promising growth, contributing to the overall GDP increase. Agriculture grew by 3.5%, while the industrial sector expanded by 5.5%, with manufacturing specifically seeing a growth of 4.7%. The services sector, which accounts for 56% of the gross value added, was the standout performer with a remarkable growth rate of 10.3%. Within this sector, financial services, real estate, and professional services collectively grew by 12.2%.
Investment growth has also been noteworthy, increasing by 8% year-on-year. Over the past four years, investment growth has averaged 4.1% annually, outpacing GDP growth slightly. This growth is vital for job creation and stimulating economic expansion, especially in a context where consumer expenditure is recovering at a slower pace.
For those seeking more detailed insights and analyses on economic trends, you can visit the official website of SRIRAM'S IAS at www.sriramsias.com. The site offers valuable resources and information related to various aspects of the economy and other significant topics.
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