Chanakya IAS Academy Blog

Notice

New Advance Estimates have arrived from CSO

The Central Statistical Organization of India (CSO) has released advance estimates for the current financial year 2016-17, indicating slowdown in economic growth despite not taking demonetization into account.

The main highlights of this report are:

  1. The Gross Domestic Product (GDP) growth rate is likely to be lower than the previous financial year.
  2. Gross Value Added (GVA) is also estimated to be lower than the previous year.
  3. RBI's forecasts for this year are on the similar lines as these estimates as it has also estimated growth rate to be 7.1% this year.
  4. They don't factor in the effects of demonetization imposed since 8 November 2016 and therefore, are likely suffering from an upward bias. The actual growth is thus, likely to be lower than these estimates.

Category

2015-16 (%)

2016-17 (%)

Remarks (%)

GDP growth rate

7.6

7.1

-0.5

Gross Value Added (GVA) growth rate

7.2

7

-0.2

  1. The sector wise performance of the economy indicates improved outputs from the agricultural sector, whereas the manufacturing and services sectors indicate slowdown in growth rates.

Good monsoons have really helped in lifting up farmers's fortunes, especially since last two years were drought-hit consecutively.

 

Sectoral growth rates

2015-16 (%)

2016-17 (%)

Remarks (%)

Agriculture

1.2

4.1

+2.9

Manufacturing

9.3

7.4

-1.9

Services

8.1

7.9

-0.2

  1. The industrial growth rate includes mining and electricity, besides manufacturing sector. All of these have clocked decrease in growth rates.

For mining sector, delays in obtaining necessary approvals were the major cause for its poor performance.

The prolonged real estate market slowdown due to rising NPAs and banks being aversive to lending, political disturbances and environmental concerns are some of the major factors responsible for slowdown.

  1. There is also a huge jump witnessed in the Government Final Consumption Expenditure (GFCE) reflecting increased spending on the part of government especially in wages and salary disbursals.

 

2015-16 (%)

2016-17 (%)

Remarks (%)

GFCE growth rate

2.2

23.8

+21.6

 

Important Economic Terms

  1. GDP

 

Gross domestic product (GDP) is an accounting tool to measure a country’s national income including contributions from the government, private sector, exports, imports, investments and consumption.

Themonetary valueof all the finished goods and services produced within a country's borders in a specific time period, usually a year, is known as GDP.

It can be calculated at constant prices or at current prices; in nominal terms or real terms adjusted with inflation; as well as in absolute numbers or in percentage terms.

It can also be referred for an entire fiscal year or can be calculated at a quarterly basis.

Numerically,

GDP = C + G + I + NX

Where,

C = All Private consumption within the economy

G = Government spending

I = All investments made in the country

NX = total net exports, calculated as total exports minus total imports (NX = Exports - Imports).

  1. GVA

 

The Gross Value Added is also a measure of national income and is related to GDP as follows:

Net indirect taxes = taxes - subsidies

Gross value added = GDP + (subsidies – taxes)

Or

GDP= GVA + Net Indirect taxes

  1. GFCE


As per OECD (Organisation for Economic Cooperation and Development), Government final consumption expenditure consists of expenditure incurred by general government on both individual consumption goods and services and collective consumption services.

These include social transfers made in kind for the direct consumption of a country's population including wages and salary payments as is seen in this year's data.

A welfare state will have higher expenditures on GFCE as compared to an authoritarian, autocratic and tyrannical state which is more concentrated upon keeping its authority intact as compared to welfarism.

Read 425 times Last modified on Saturday, 07 January 2017 12:32

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