{"id":33545,"date":"2022-11-30T09:13:11","date_gmt":"2022-11-30T03:43:11","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=33545"},"modified":"2025-04-19T23:21:02","modified_gmt":"2025-04-19T17:51:02","slug":"manufacturing-shrinks-slowing-q2-gdp-growth-to-63","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/manufacturing-shrinks-slowing-q2-gdp-growth-to-63\/","title":{"rendered":"Manufacturing shrinks, slowing Q2 GDP growth to 6.3%"},"content":{"rendered":"<h3><strong>Why in News?<\/strong><\/h3>\n<ul>\n<li><strong>The Ministry of Statistics and Programme Implementation (MoSPI) recently released India&#8217;s economic growth data for the current fiscal year&#8217;s second quarter (July-Sept (Q2) for the FY 2022-23.<\/strong><\/li>\n<li><strong>India&#8217;s gross domestic product (GDP) grew by 6.3% and gross value added (GVA) by 5.6% year on year in Q2, slower than the GDP growth rate in the same months in 2021.<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What\u2019s in today\u2019s article?<\/strong><\/h2>\n<ul>\n<li>Key terminologies<\/li>\n<li>How to read the recently released data<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Key Terminologies:<\/strong><\/h2>\n<h3><strong>Gross Domestic Product (GDP)<\/strong><\/h3>\n<ul>\n<li>GDP and GVA are the two main ways to ascertain the country\u2019s economic performance that <strong>measures national income.<\/strong><\/li>\n<li>The GDP is a monetary measure of all final products and services (those purchased by the final user) produced in a country over a certain period.<\/li>\n<li>The GDP accomplishes this <strong>by adding total expenditures <\/strong>in the economy, examining who spent how much, thus, measuring the economy&#8217;s overall &#8220;<strong>demand<\/strong>.&#8221;<\/li>\n<li>The economy has recovered since the pandemic, but the <strong>manufacturing sector&#8217;s contraction<\/strong> has cast doubt on future demand.<\/li>\n<li>Higher interest rates and no substantial increase in consumption against the backdrop of a slowing global economy will offer challenges in the current fiscal year&#8217;s second half.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><strong>Gross value added (GVA):<\/strong><\/h3>\n<ul>\n<li>Gross Value Added (GVA) calculates the same national income from the <strong>supply side<\/strong>, by adding up all the value added (value of output minus the value of its intermediary inputs) across different sectors.<\/li>\n<li>This value added is shared among the primary factors of production, labour and capital.<\/li>\n<li>By looking at the GVA growth one can understand <strong>which sector of the economy is robust and which is struggling.<\/strong><\/li>\n<li>The biggest news in Q2 GVA data is the contraction in the manufacturing sector, which <strong>declined by 4.3%.<\/strong><\/li>\n<li>This is significant because manufacturing has a large potential for employment generation and can absorb excess agricultural labour.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What are the 4 key engines of GDP growth?<\/strong><\/h2>\n<ul>\n<li>Private consumption (Private Final Consumption Expenditure or PFCE).<\/li>\n<li>Government Final Consumption Expenditure (GFCE) on salaries, etc.<\/li>\n<li>Gross Fixed Capital Expenditure &#8211; investments (by businesses\/govt) to boost the productive capacity of the economy.<\/li>\n<li>Net Exports (NX) = Exports minus imports.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>How are GDP &amp; GVA related?<\/strong><\/h2>\n<ul>\n<li>GDP = (GVA) + (Taxes earned by the government) \u2014 (Subsidies provided by the government).<\/li>\n<li>If the taxes &gt; subsidies it provides, the GDP will be higher than GVA. <strong>For the Q2,<\/strong> the GDP (at Rs 38,16,578 crore) is much higher than the GVA (which is at Rs 35,05,599 crore).<\/li>\n<li><strong>Though the GDP is derived by looking at the GVA data, <\/strong>GDP data is more valuable when looking at annual economic growth and comparing a country&#8217;s economic growth to its growth in the past or to that of another country.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>How to read the recently released data?<\/strong><\/h2>\n<h3><strong>GVA:<\/strong><\/h3>\n<p><img decoding=\"async\" src=\"https:\/\/lh6.googleusercontent.com\/HenkaJ4e8FJsLpN3M40nLOhYXe9DV4dQbdvfuwVdKHGAd0r8re2Dz6YNkowaLcBdG_3CqXYAVWsNSNtUqL8eTqZTTBkwHLHXdcXr7z4kvX-QBx4FyJ2_MznnzkiBLa1I3l8-D0KibqIIPrObJR6ecw\" alt=\"\" \/><\/p>\n<p>Image Caption: Changeover in India\u2019s economic sector<\/p>\n<ul>\n<li>It would be a mistake to conclude that only Covid and its aftereffects are to blame for India&#8217;s poor <strong>manufacturing <\/strong>performance, as the country&#8217;s manufacturing sector has struggled to add value for the past 6 years.\n<ul>\n<li><strong>For example,<\/strong> according to CMIE data, manufacturing jobs were slashed by half between 2016 and 2020.<\/li>\n<\/ul>\n<\/li>\n<li>One positive story emerging from the GVA pertains to <strong>agriculture <\/strong>(along with forestry and fishing), which has done better than expected by growing at 4.6%.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><strong>GDP<\/strong><\/h3>\n<p><img decoding=\"async\" src=\"https:\/\/lh6.googleusercontent.com\/NIXn28i2oHlFfqIkbk1CLO4PQtFVvld2PpuAtRIJdakrqWM7PXvS_1_xOnYfHGtftbdk03UlOpyId5LoFbswBWE_tDA1l8l2I_cBkWP_cL9A5FmR2OrHyPD_XybA1gY_HClFrYIdCX4S1a8ICtuXIQ\" alt=\"\" \/><\/p>\n<p>Image Caption: Breakdown of total GDP of India<\/p>\n<ul>\n<li>On the GDP side, the biggest engine of growth is private consumption expenditure. It typically contributes over 55% of India\u2019s total GDP.<\/li>\n<li>This component is also crucial because it incentivizes businesses to make fresh investments and expenditures towards investments are the 2nd biggest contributor to the GDP, accounting for around 33% of the total.<\/li>\n<li>The biggest surprise is the contraction in government final consumption expenditures.<\/li>\n<li>While these types of expenditures account for just 10-11% of GDP, <u>they have the potential to support an economy when people and businesses reduce their spending<\/u>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is the difference between GDP and GVA?<\/strong><\/h3>\n<p>The GDP gives the picture from the consumers\u2019 angle or demand perspective, whereas the GVA gives a picture of the state of economic activity from the producers\u2019 perspective or supply side.\u00a0\u00a0<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2) H2: What is potential GDP?<\/strong><\/h3>\n<p>Potential gross domestic product (GDP) is the level of output which any economy can produce at a constant inflation rate<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently released India&#8217;s economic growth data show slowdown in GVA and GDP growth<\/p>\n","protected":false},"author":5,"featured_media":33546,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-33545","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33545","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=33545"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33545\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/33546"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=33545"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=33545"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=33545"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}