Do you think Indians should rejoice by the fact that Indian nominal GDP has

crossed $2 trillion?

The estimates for the end of last year are less baffling. True, a real growth
rate of 7.5% looks a little too lively given sluggish car sales, feeble demand for
credit, and the soggy revenue growth reported by many big listed firms. Tax
revenue has not been notably buoyant. But the recent sharp fall in inflation
explains some of the discrepancy. Firms top-line growth has slowed in part
because prices are not rising as quickly. The tax take is also harmed when
inflation falls. The CSO reckons GDP will grow by 7.4% in 2014-15 in real
terms, half a percentage point faster than in the previous year. However, the
increase in nominal GDP (ie, including inflation) is forecast to fall from 13.6%
to 11.5%. In other words, falling inflation makes it look like economic activity is
growing more slowly than it is.
Prospects for Indias economy are brighter than for other emerging markets.
After a slow start, Mr Modis government is pursuing reforms more urgently
(though a big defeat in elections in Delhi this week may slow things again).
Lower commodity prices, which have hurt raw-material exporters such as
Brazil, Russia and South Africa, are a boon for India, which imports 80% of
the oil it consumes and much else. The current-account deficit has shrunk.
The rupee is firm.
In the particular case of India, a high nominal GDP would mean a high
prosperity only if there is a trickle down effect in all the sectors and income
categories of the economy. In a capitalist nation a complete parity in the
distribution is impossible however, there should be a major focus to increase
the economic freedom in the lower income groups.
GDP growth this year is led by consumption growth and backed by a falling
inflation and monetary easing. Investment growth revival will take place once
capacity utilisation starts increasing. Weak global demand is also attributed to
lower growth in the first quarter.The latest numbers depict an economy that is
in the early stages of recovery and is showing modest improvements. Going

ahead, we would expect growth rates to improve, with the government also
likely to impart a greater push via reform measures
Also, if the monsoon concerns are true, it could impact the agriculture
production and stoke worries over food inflation and economic growth.
With economic growth slowing to 7 per cent in the April-June quarter, the
subdued performance indicates that the cost of capital needs to come down,
demanding a rate cut by RBI.
Both consumption and investment levers need a thrust. While the government
stands committed to further the reforms agenda, we need to equally create
conditions that provide capital at an affordable cost to our entrepreneurs. We
hope that RBI will usher in a deeper cut in policy rates in its September review
of the monetary policy .The GDP growth slowed to 7 per cent in the June
quarter, from 7.5 per cent in the previous quarter, amid deceleration in farm,
services and manufacturing sectors.
With prices seemingly under control, we urge the monetary authority to focus
on ensuring that cost of finance to industry becomes competitive, more so
especially in the context of subdued growth as indicated by the recent IIP
numbers.
Easing of monetary conditions would lead to a lower lending rate framework
that would aid both consumption and investment demand. Therefore, RBI
must give due consideration to reviving industrial growth in the country .The
industry body also expressed concern over anticipated slowdown in the pace
of reforms. The government needs to keep on pushing at more ground-level
reforms and improve implementation so as to realise the economy's true
potential.
The need is for creating an investment- and industry-friendly environment that
is largely focused on growth, job creation, poverty alleviation and passing the
benefits of the economic growth to the lowest sections of the economy.
The Gross Value Added (GVA), a new concept introduced by CSO to measure
the economic activity, also slipped during the first quarter to 7.1 per cent, from
7.4 per cent a year ago.
The government should continue to push critical reforms and take pro-active
steps to effect simplification of procedures, ensure transparent and flexible tax
system and work towards a political consensus for ensuring early passage of
GST, labour laws etc to rev up business confidence and help ramp up
demand in the economy.

Yea
r

GDP (billions of
$)
Nomin
al

2020

3,639.80

2019

3,311.75

2018

3,012.90

2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999

2,755.83
2,510.60
2,308.02
2,049.50
1,875.16
1,835.82
1,843.02
1,708.46
1,365.37
1,224.10
1,238.70
949.12
834.22
721.59
618.37
523.77
493.93
476.64
466.84

PPP
12,708.3
6
11,565.7
4
10,528.7
8
9,574.55
8,722.55
7,996.62
7,375.90
6,783.66
6,252.67
5,845.36
5,370.62
4,812.08
4,402.48
4,156.08
3,686.98
3,273.78
2,902.27
2,619.03
2,378.85
2,254.78
2,100.67
1,975.41