Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Current Growth Performance
- India’s GDP rose 8.2%, reaching ₹48.63 lakh crore in a single quarter.
- This increase signals genuine economic momentum, not merely a post-pandemic rebound.
- Manufacturing grew 9.1%, showing stronger demand and higher factory capacity utilisation.
- Services expanded 9.2%, with financial services growing 10.2%, supported by strong credit and urban consumption.
- Real GVA increased from ₹82.88 to ₹89.41 lakh crore, reflecting genuine value addition.
- Nominal GDP grew 8.8%, indicating inflation remained contained.
- PFCE grew 7.9%, showing healthier household spending.
- Agriculture grew 3.5%, aided by better reservoirs and improved horticulture output.
Supportive Macroeconomic Conditions
- Inflation softened through 2024-25, even falling below target later in the year.
- Banks saw strong credit demand and maintained clean balance sheets with high capital buffers.
- Fiscal consolidation progressed through solid GST and direct tax collections.
- The external sector remained stable with a small CAD, strong services exports and diversified reserves.
IMF’s ‘Grade C’ Assessment
- IMF downgraded India to Grade C on national income accounting quality.
- Concerns included: outdated 2011–12 base year, reliance on WPI deflators, excessive single-deflation methods, gaps between production and expenditure approaches, and lack of seasonally adjusted data.
- Missing consolidated State and local body data after 2019 also weakened statistical robustness.
- The IMF’s grade reflects institutional weaknesses, not the GDP growth rate itself.
Emerging Structural Weaknesses
- Mining stagnated at 0.04%, while utilities grew only 4.4%, revealing uneven sectoral recovery.
- Output structure is service-heavy, but employment remains concentrated in agriculture and low-wage services, limiting productivity gains.
- RBI warns exports face threats from protectionism, tariff uncertainty, and geopolitical tensions.
- Services and remittances support the CAD but cannot replace a diversified goods export base.
- The rupee appeared stable but faced constant downward pressure from global capital movements.
Conclusion
- India’s 8.2% growth is real, yet structural vulnerabilities persist.
- The IMF’s grade urges focus beyond quarterly numbers toward institutional capacity, labour productivity, and export depth needed for durable long-term growth.