RBI’s Report on the Economy’s Performance so Far in 2024-25

What’s in today’s article?

• Why in News?
• Highlights of the RBI’s Report
• Bright Spots in India’s Economy’s Performance
• Indian Economy’s Challenges and Way Ahead

Why in News?

The first official gauge of the economy’s performance so far in 2024-25 has been recently released by the Reserve Bank of India (RBI).

Highlights of the RBI’s Report:

• Gross Domestic Product (GDP) growth:
  • Earlier this month, the RBI reduced its Q1 GDP forecast from 7.2% to 7.1%.
  • The RBI anticipates 7.2% GDP growth through 2024–2025 after last year's 8.2% surge.
• Growth in the Gross Value Added (GVA):
  • For the first time in a year, growth in the real GVA in the economy outperformed GDP growth, with a 6.8% uptick in the first quarter (Q1) of 2024-25.
  • This GVA growth in Q1 has been driven by significant growth in the Secondary Sector (8.4%), comprising construction, utility services (such as electricity, gas, water supply) and manufacturing sectors.
• Employment generation:
  • India provisionally created 46.7 million jobs in the financial year ended March 2024, taking the country's total employment to 643.3 million.
  • The country's employment growth rate stood at 6% in that fiscal year, versus 3.2% in the previous fiscal year.
• Bank credit growth:
  • Credit to agriculture and allied activities remained robust, registering a growth of 18.1% at Rs 21.55 lakh crore in July 2024, compared with 16.7% a year ago.
  • Credit growth to industry strengthened significantly at 10.2% to Rs 37.05 lakh crore in July 2024 compared with 4.6% in July 2023.
  • Credit growth to services sector moderated to 15.4% in July 2024 from 19.7% a year ago, primarily driven down by relatively lower credit growth in non-banking financial companies (NBFCs) and trade segments.

Bright Spots in India’s Economy’s Performance:

• Normal monsoon: It will boost farm sector output and ease inflation, which could lift the weak rural demand and private consumption.
• Private investment: Increased demand would lessen the need for government expenditure to support growth by encouraging private firms to invest in new capacities.

Indian Economy’s Challenges and Way Ahead:

• The prolonged general election has severely hindered public capital expenditure, and the government will have to work even harder to reach its spending targets.
• The policymakers need to urgently pursue meaningful reforms across all aspects of the economy, and improve the efficiency of its institutions and the judiciary.

This is critical to lift its growth potential and fulfill hopes of creating gainful employment for its young, fast enough for India’s demographics to yield a dividend.

Q.1. What is the difference between GDP and GVA?

GDP is the total value of all goods and services produced in a country, while GVA is the value added to those goods and services after accounting for subsidies and taxes. GVA allows for detailed analysis of specific sectors, while GDP provides a broader perspective of the economy as a whole.

Q.2. What are the non-banking financial companies (NBFCs)?

A NBFC is a financial institution that offers financial services but does not have a full banking license. NBFCs are an important part of India's financial system and play a key role in disbursing credit.

Source: At 6.7%, growth slid to five[1]quarter low in Q1 | IE |ET