PGDM BATCH 2023-25

Macro Economics

GDP of India: Trends and Patterns

Submitted By,
Group C1 - Section C:

Alif Ahsan - 23118

Chaitanya K - 23129
Narendrakumar G - 23140
Shashikanth - 23150
Sukrutha J - 23160
Vijay Anand A - 23170

Submitted To,
Dr Venkatraja B
Associate Professor – Economics

DATE OF SUBMISSION: 14/03/2024

 Table of Contents

Introduction................................................................................................................................1
Nominal GDP & Real GDP:......................................................................................................2
Sector-wise GDP Distribution and Growth Rate.......................................................................3
Composition wise GDP Distribution:........................................................................................6
Pre and Post Covid Scenarios....................................................................................................8
Inflow & Outflow of Foreign currencies (Balance of Payment) Net values..............................9
Where is India headed?............................................................................................................10
References................................................................................................................................13

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Introduction

Gross Domestic Product (GDP) serves as a widely used metric for gauging economic activity
and the scale of an economy. It quantifies the total value of all goods and services generated
within a nation's borders over a specific timeframe, typically a year.
Y= C + G + I + (X-M)
The calculation of GDP involves several components:
 Consumption (C), encompassing expenditure on services, non-durable goods, and
durable goods.
 Government expenditure (G), covering various items such as employee salaries,
infrastructure development, and defense spending.
 Investment (I), comprising spending on housing and equipment.
 Net exports (X-M), representing the disparity between total exports and imports.
In this equation, Y symbolizes Gross Domestic Product.
GDP serves as a crucial economic gauge, aiding policymakers and analysts in assessing the
economic well-being of a country. It provides insights into overall economic activity and
growth.
The correlation between GDP growth and enhanced standards of living is well-established. A
higher GDP signifies increased economic output, which can translate into expanded
employment opportunities, elevated incomes, and enhanced access to goods and services for
the populace.
GDP of India:
India is poised to emerge as one of the swiftest expanding major economies globally this
year, driven by sound macroeconomic strategies. The country's GDP surged by 8.4 percent in
the third quarter of FY24, as per the Statistics Ministry's assessments. This figure represents a
notable uptick of 4.1 percent compared to the corresponding period in FY23, which saw a
growth rate of 4.3 percent.
According to the Ministry of Finance, the Indian economy is projected to achieve robust
growth of 7.3% in FY 2023-24, surpassing the provisional growth rate of 7.2% recorded in
the previous fiscal year. Notably, the construction sector is forecasted to experience double-
digit growth at 10.7%. Across various economic sectors, growth rates exceeding 6% have
been observed, with the exception of the Agriculture and Allied sector, which is estimated to
have grown by 1.8%. However, concerns persist regarding the growth rate of private
consumption, which stands at 3.6% and remains a focal point for economists.

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The contribution of exports to GDP amounted to 22.2% in the third quarter, representing a
slight decline compared to the preceding quarter.

Nominal GDP & Real GDP:

The term nominal gross domestic product (GDP) refers to the GDP evaluated at current
market prices. Put simply, nominal GDP is the total value of all goods and services produced
in a given time period less the value of those made during the production process.

Nominal GDP or GDP at Current Prices is expected to reach ₹296.58 lakh crore in the fiscal
year 2023–24, as opposed to the ₹272.41 lakh crore Provisional Estimate for the previous
fiscal year 2022–23, which was issued on May 31, 2023. Estimated nominal GDP growth for
2023–24 is 8.9%, which is less than the 16.1% growth rate for 2022–2023 that was noted.
Real gross domestic product (GDP) is an inflation-adjusted measure that reflects the value of
all goods and services produced by an economy in a given year. Real GDP is expressed in
base-year prices. It is often referred to as constant-price GDP, inflation-corrected GDP, or
constant-dollar GDP. Put simply, real GDP measures the total economic output of a country
and is adjusted for changes in price.
In the fiscal year 2023-24, Real GDP or GDP at Constant (2011-12) Prices is projected to
reach ₹171.79 lakh crore, compared to the Provisional Estimate of ₹160.06 lakh crore for the
preceding fiscal year 2022-23, released on May 31, 2023. The growth in real GDP for 2023-
24 is estimated at 7.3%, marking a slight increase from the 7.2% growth observed in 2022-
23.

Current GDP of India Sector wise:

The services sector is the largest sector of
India. Gross Value Added (GVA) at current
prices for the services sector is estimated
at 131.96 lakh crore INR in 2022-23. The
services sector accounts for 53.33% of
total India's GVA of 247.43 lakh crore
Indian rupees. With GVA of Rs. 69.89 lakh
crore, the industry sector contributes

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28.25%. While Agriculture and allied
sector share 18.42%.

Component -wise GDP in India (2022-2023)

Private final consumption: 57.2% Government final consumption: 10.3% Gross fixed capital
formation: 33.9% Exports of goods and services: 22.7% Imports of goods and services: -
29.7% Other source: 5.7% (FY 2022–23)

Sector-wise GDP Distribution and Growth Rate

The Gross Domestic Product (GDP) of a nation reflects its economic performance and
provides insights into the contributions of various sectors to its growth. This report analyses
the sectoral trends in India's GDP from 2013 to 2023, focusing on the primary (agriculture,
forestry, and fishing), secondary (manufacturing and construction), and tertiary (services)
sectors.

Real GDP (INR) and Growth Rate:

Over the ten-year period, India's Real GDP has shown a consistent upward trajectory,
increasing from ₹15.02 trillion in 2013 to ₹25.15 trillion in 2023. While there have been

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fluctuations in growth rates, notably a contraction in 2020 due to the COVID-19 pandemic,
subsequent years saw robust recovery, with significant growth rates recorded, such as 8.70%
in 2021 and 17.33% in 2022.

Sector-wise GDP:
1. Tertiary Sector (Services): This sector consistently held the highest share throughout
the period, ranging from around ₹7.03 trillion in 2013 to ₹12.24 trillion in 2023.
2. Secondary Sector (Manufacturing and Construction): The secondary sector's share
fluctuated, with a peak of around ₹6.07 trillion in 2016 and a low of ₹3.55 trillion in
2020.
i. Significant Contribution: The secondary sector has played a substantial role, with
its share ranging from 16.03% (2019) to 27.66% (2016). This highlights the
importance of manufacturing and construction activities in the Indian economy.
ii. Fluctuations: The variations in the secondary sector's share can be attributed to
factors like:
 Government policies: Initiatives promoting or hindering specific industries
within the sector.
 Global economic conditions: Fluctuations in demand for manufactured goods,
commodity prices, and trade patterns.
3. Primary Sector (Agriculture, Forestry, and Fishing): The primary sector's share
remained relatively stable, indicating its limited role in driving overall GDP growth
like:
i. Gradual Decline: The primary sector's share has steadily decreased from 8.09%
in 2013 to 6.24% in 2023. This reflects a shift in the economic structure towards
services, indicating:
 Increased productivity in agriculture leading to a smaller workforce
requirement.
 Growth of other sectors offering higher income opportunities, leading to a
migration of labour away from agriculture.
ii. Fluctuations: The rise in the primary sector's share in 2017 (10.00%) and 2020
(8.10%) could be due to:
 Favourable weather conditions leading to good agricultural performance.

 Disruptions in global supply chains during the pandemic, favouring local

agricultural production.

Analysis for 10 years

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2013-2015:
 The tertiary sector consistently grew, indicating a shift towards a service-based
economy.
 The decline in the primary sector's share could be attributed to stagnant agricultural
productivity.
 Fluctuations in the secondary sector might be due to global economic conditions and
government policies.
2016:
 The highest contribution from the secondary sector was observed, possibly due to
government initiatives and favourable global conditions.
 The primary sector's lowest contribution suggests a continuous decline in its relative
importance to GDP growth.
2017-2018:
 The primary sector's share saw fluctuations, driven by agricultural performance and
global commodity prices.
 Tertiary sector's dominance continued to grow, reflecting its resilience and
adaptability.

2019:
 Moderate economic growth with declining shares in both primary and secondary
sectors.
 The tertiary sector maintained its dominance, indicating a growing reliance on
services.
2020:
 Overall GDP contraction was due to the impact of the COVID-19 pandemic.
 Primary sector's share increased slightly, reflecting a focus on domestic food security.
 Secondary and tertiary sectors witnessed declines, reflecting widespread economic
slowdown.
2021-2023:
 Strong recovery observed, especially in 2022, with significant GDP growth rates.
 Secondary sector showed improvement, possibly due to government initiatives and
rebounding global demand.

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  Tertiary sector remained dominant, although its share slightly decreased compared to
2022.

Composition wise GDP Distribution:

This analysis delves into the composition-four major distribution of India over 12 years years,
from 2011 to 2022 The analysis focuses on four major expenditure components:
Consumption Expenditure (C), Government Expenditure (G), and Investment Expenditure (I)
and net export (NX) By examining the trends and fluctuations in each component's share of
the total GDP, we can gain a deeper understanding of India's economic landscape and the
factors influencing its growth trajectory.

Composition-wise GDP Distribution (in Lakh Crores)

180.00
160.06
160.00 147.36
145.16
139.93
135.58
140.00 131.45
54.35
123.08
120.00 113.69 46.11 47.84
105.28 45.41 41.31
98.01 40.83
100.00 92.13 37.88 15.77
87.36
34.92 14.84 15.77
32.78 14.35 15.38
80.00 31.95 13.45
29.98 31.46 12.02
11.33
9.80 10.54
60.00 9.68 9.74
93.59
40.00 78.50 82.60 77.64 83.78
69.00 73.31
59.13 63.81
49.10 51.79 55.57
20.00

0.00
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

C G I GDP

The above graph shows the distribution of consumption expenditure, government expenditure
and investment expenditure.
Here's a breakdown of the observations from the graph and possible reasons for the trends,
based on information available online:

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Consumption Expenditure (C): This is the largest component of GDP throughout the period
shown, and it has generally been increasing over time. This is likely due to India's growing
population and rising household incomes. There are some fluctuations, which could be due to
factors like inflation or changes in government policies, like Pradhan Mantri Jan Dhan Yojana
scheme launched in 2014 has provided millions of Indians with access to bank accounts. This
can encourage saving initially, but over time, it can also make it easier for people to access
credit and spend more. Goods and Services Tax (GST) Implemented in 2017, this reformed
the indirect tax system in India. While its long-term impact is being debated, in the short
term, it may have led to some fluctuations in consumption due to price changes.
Government Expenditure (G): This is the second largest component of GDP and has also
been increasing over time. This could be due to a few factors, such as increased government
spending on social programs, infrastructure development, or defence. There are fluctuations
as well, which could be due to changes in government priorities or economic conditions.
Investment Expenditure (I): This is the smallest component of GDP, and it has shown more
variation over time. It can be volatile due to factors like business confidence, interest rates,
and the availability of credit. For instance, there was a significant drop in investment
expenditure in 2020-21, which likely reflected the impact of the COVID-19 pandemic on
businesses.
Net export:
Net exports represent the net flow of goods and services between a country and the rest of the
world. It is calculated as: Exports – Imports

NE
0.00
11 12 13 14 15 16 17 18 9 0 1 2 3
10- 11- 12- 13- 14- 15- 16- 17- 8-1 9-2 0-2 1-2 2-2
-1.00 0 0 0 0 0 0 0 0 01 01 02 02 02
2 2 2 2 2 2 2 2 2 2 2 2 2
-1.41 -1.33
-2.00 -1.55
-1.76

-3.00
-3.09
-3.37
-4.00
-3.99
-4.37
-5.00 -4.76
-5.08
-6.00 -5.72-5.89

-7.00
-7.03
-8.00

The graph represents the next exports.

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Reasons for More Negative Net Exports in India (2011-12, 2012-13, 2021-22)

 Global Slowdown: Data from the World Bank shows that global GDP growth slowed
down in 2011 (to 3.8%) and 2012 (to 3.5%), likely impacting demand for Indian
exports. The International Monetary Fund (IMF) also reported a global economic
slowdown in 2021 due to the COVID-19 pandemic.
 High Import Costs: According to the Reserve Bank of India (RBI) data, the global
crude oil price averaged around $100 per barrel in 2011-12 and 2012-13. This
increase likely contributed to a higher import bill for India, a major oil importer.
 Currency Appreciation: Data from the World Bank shows that the Indian Rupee
appreciated against the US Dollar by around 7% in 2011 and 5% in 2012. This
appreciation might have made Indian exports slightly less competitive in the global
market.

Reasons for Less Negative Net Exports (2013-14 to 2017-18)

 Global Recovery: World Bank data confirms a period of global economic recovery
between 2013 and 2017, with GDP growth rising from 2.9% in 2013 to 3.6% in 2017.
This likely led to an increase in demand for Indian exports.
 Stable Import Costs: While a comprehensive analysis is needed, global oil prices
generally declined between 2014 and 2016, potentially reducing India's import bill.
You can verify this using data from agencies like the US Energy Information
Administration (EIA).
 Government Initiatives: During this period, the Indian government launched
initiatives like "Make in India" to promote domestic manufacturing. This could have
led to a slight decrease in reliance on imports for certain goods.
The total GDP is given by some of consumption expenditure, government expenditure and
investment expenditure and net export.

Pre and Post Covid Scenarios

Covid-19 hit globe and India in early 2020 and had adverse impact on the global economies
including India. In FY 2019-20, India’s GDP was $2835.61 Billion with growth rate of 3.87%
(which was 2.58% less than previous FY 2018-19) and per capita income of $2050. Out of
the total, primary sector contributed 16.03%, secondary sector contributed 26.41% and
service sector contributed 48.43%. In the next FY i.e. 2020-21 first lockdown was announced
in India due to Covid-19 which had negatively impacted the Indian economy. Indian GDP
had come down to $2671.60 Billion and had negative growth rate of -5.83%. Also, GDP per
capita was reduced to $1913. The consumption, government, and investment expenditure, in
FY 2019-20 was Rs. 82.60, Rs. 14.48, Rs. 46.11 Lakh Crores. During FY 2020-21,
consumption and investment expenditure was reduced to Rs. 72.64 and Rs. 41.31 Lakh
Crores which turns out to be -6% and -10.40%. There was an increase of 3.59% in

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Government expenditure as it was increased to Rs. 15.38 Lakh crores from Rs. 14.48 Lakh
crores.

Pre Covid and Post Covid

180.00
160.06
160.00 145.16 147.36
139.93 135.58
140.00 54.35
120.00 46.11 47.84
45.41 41.31
100.00 15.77
14.84 15.77
14.35 15.38
80.00
60.00
82.60 83.78 93.59
40.00 78.50 77.64
20.00
0.00
2018-19 2019-20 2020-21 2021-22 2022-23

Consumption Government Investment GDP

Inflow & Outflow of Foreign currencies (Balance of Payment) Net values

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Interpretation for Balance of Payment
In Balance of Payment all figures that is mentioned in the table all are Net value (ie debit &
credit) and the figures which are all in negative in the tables implies that import is more than
export. In Trade Balance we can see that all numbers are in negative it implies that import is
more than export that too in year 20-21 to 21-22 Net trade balance by (87307 million) this is
the drastic change when compared other years.
Current balance is also increased by 28315 million between 22 to 23 this implies that we are
highly dependent and importing more products and services from foreign countries.
In Capital account the investment that we have received is more than what we invest to
foreign countries in 20-21 we received more investment. And in total all values are positive in
the latest year it has been decreased from 85807 to 53495 million.
In overall Balance the value has been positive to negative it implies because of various
factors like NRI deposit, commercial borrowing, Rupee debt service etc So it clearly says
atlast outflow is more in 22-23 eventhough some contributes in a positive values.

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Where is India headed?
It is projected that the Indian economy would grow by 6.8% in the next fiscal year, and by
2031, it is expected to have a GDP of USD 7 trillion, making it the world's third largest
economy. According to Crisil, cyclical forces and domestic reforms would assist this rise,
enabling India to achieve upper middle-income status by 2031. But there are obstacles in the
shape of geopolitical unrest, the world economy's recovery, climate change, and technology
advancements. It is anticipated that the manufacturing and services sectors will be the main
engines of growth, with 9.1% and 6.9% growth, respectively, in manufacturing and services
between 2025 and 2031.
In the fiscal year 2023-24, India's nominal Gross Domestic Product (GDP) at current prices is
estimated at Rs. 296.58 trillion (US$ 3.56 trillion), indicating a growth rate of 9.1%
compared to the previous year. As of October 3rd, 2023, India boasts 111 unicorns with a
collective valuation of US$ 349.67 billion, positioning it as the third-largest unicorn base
globally. India aims to transition 40% of its energy consumption to non-fossil sources by
2030 and commits to achieving Net Zero Emissions by 2070 through its 'Panchamrit' strategy.
According to the McKinsey Global Institute, India needs to create 90 million non-farm jobs
between 2023 and 2030 to bolster productivity and economic growth, targeting a GDP growth
rate of 8-8.5% by annually increasing the net employment rate by 1.5% during the same
period. Additionally, India's current account deficit stood at US$ 8.3 billion, equivalent to 1%
of GDP, in the second quarter of fiscal 2023-24.
Despite challenges stemming from economic slowdowns in trade partner countries, Minister
Piyush Goyal remains optimistic about Indian exports reaching US$ 1 trillion by 2030.
According to a report by Goldman Sachs
Research published on July 11, 2023, India
is projected to surpass the United States
and become the world's second-largest
economy by the year 2075. Currently,
India holds the fifth position among the
world's largest economies, following
behind Germany, Japan, China, and the
United States.

India's future is a fascinating confluence of immense potential and pressing challenges:

Economic Powerhouse:

 Growth Engine: Buoyed by a young and aspirational workforce, India's GDP is

projected to surge towards $10 trillion within the next two decades, surpassing

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 established economies like Germany and Japan [PwC India]. This growth story is
fuelled by rising domestic consumption as millions enter the middle class, creating a
vast market for both domestic and international businesses [Harvard Business
Review].
 Demographic Dividend: India boasts a significant advantage with its young
population. By 2025, India is expected to have the world's largest working-age
population, providing a skilled and energetic workforce for businesses. This
demographic dividend can be a springboard for innovation and entrepreneurship,
propelling India's economic growth for years to come [Department of Foreign Affairs
and Trade].

Technological Leap:

 Digital Powerhouse: India has already carved a niche for itself in the IT sector and is
rapidly transforming into a hub for digital services. The world's second-largest
internet user base, expected to surpass 850 million by 2030, is driving this digital
revolution [Department of Foreign Affairs and Trade]. This translates to immense
opportunities for e-commerce, fintech, and digital content creation, transforming
industries and fostering financial inclusion.
 Innovation Hub: Recognizing the importance of R&D, the Indian government is
actively investing in cutting-edge technologies like artificial intelligence and
renewable energy. This focus on innovation positions India as a key player in the
global landscape, with the potential to develop solutions for pressing global
challenges [PwC India].

Challenges and the Road Ahead:

 Infrastructure Development: To truly harness its economic potential, India needs to

prioritize infrastructure development. Upgrading roads, ports, and digital connectivity
is crucial for the efficient movement of goods, services, and people across the vast
nation [PwC India].
 Skilling the Workforce: Equipping the young workforce with the skills required for
the knowledge economy is paramount. Educational reforms focusing on STEM
(science, technology, engineering, and mathematics) along with job-specific training
programs are essential to bridge the skill gap and ensure employability in the evolving
job market [S&P Global].
 Social Issues: Addressing social issues like poverty, income inequality, and gender
disparity is critical for inclusive and sustainable growth. Ensuring equitable access to
education, healthcare, and economic opportunities for all sections of society will be
vital for India to fully tap into its potential and emerge as a global leader.

India's future hinges on its ability to capitalize on its strengths while navigating these
challenges. By strategically investing in infrastructure, education, and social welfare

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programs, India can translate its demographic and technological potential into a future of
shared prosperity and global influence.

Conclusion:

The Gross Domestic Product (GDP) of a nation like India reflects its economic performance
and provides insights into the contributions of various sectors to its growth. Over the years,
India has shown a consistent upward trajectory in Real GDP, indicating growth and
resilience. The services sector has consistently held the highest share, while the secondary
sector has played a substantial role in the economy, showcasing the importance of
manufacturing and construction activities. The primary sector, comprising agriculture,
forestry, and fishing, has remained relatively stable but with a declining share in driving
overall GDP growth.

India's future economic outlook is promising, with projections indicating significant growth
potential. The country aims to reach a GDP of USD 7 trillion by 2031, positioning itself as
the third-largest economy globally. Challenges such as geopolitical issues, global economic
recovery, climate change, and technological disruptions need to be addressed. The
manufacturing and services sectors are expected to be key drivers of growth, with initiatives
like "Make in India" promoting domestic manufacturing.

Overall, India's economic trajectory points towards continued growth and development,
leveraging its demographic dividend, technological advancements, and strategic reforms to
emerge as a global economic powerhouse. Addressing infrastructure development, skilling
the workforce, and tackling social issues will be crucial for India to realize its full potential
and establish itself as a leader on the world stage.

References

https://www.forbesindia.com/article/explainers/fdi-in-india-inflows/89609/1
https://www.india-briefing.com/news/india-fdi-inflow-2023-latest-data-analysis-on-
investment-landscape-27821.html/#advantageindiaHeader
https://www.drishtiias.com/daily-updates/daily-news-analysis/india-to-become-third-largest-
economy-by-2031
https://www.ibef.org/economy/indian-economy-overview
https://timesofindia.indiatimes.com/business/india-business/india-to-surpass-us-to-become-
worlds-2nd-largest-economy-by-2075-report/articleshow/101657139.cms

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