A SIGNIFICANT CHANGE IN INDIA’S GROSS DOMESTIC PRODUCT

Kuldeep Kaur (178978)

Palak Sharma (177885)
Savreen (177904)
Puneetpal Singh (177831)

Dr. Christine Drewitt

Business Instructor
Amanpreet Singh
Teaching Assistant
Portage College
Edmonton

September 30, 2024

 Table of Content
Introduction
Gross Domestic Product of India
Effects and fluctuations in India’s GDP
Impact on society’s economic well being
Challenges faced by country for its economic growth
Methods that can enhance its economic growth
Conclusion
References
Introduction
Gross Domestic Product (GDP) is a key economic indicator that quantifies the total monetary
value of all finished goods and services produced within a country’s borders over a specific
period, usually a year or a quarter. It offers a comprehensive overview of a nation’s economic
health and productivity.

GDP Formula:

The expenditure approach is the most commonly used method to calculate GDP

GDP = C + I + G + (X - M) Where:

C = Consumer spending

I = Business investment

G = Government spending

X = Exports

M = Imports

This formula sums up the spending by different sectors of the economy.

Components of GDP:

 Consumer Spending (C): Includes all private expenditures on durable goods, non-durable
goods, and services.
 Business Investment (I): Encompasses spending on capital equipment, inventories, and
housing.
 Government Spending (G): Covers all government expenditures, including salaries of
government employees, infrastructure projects, and military spending.
 Net Exports (X - M): Represents the difference between a country’s total exports and
total imports.

Approaches to GDP:

Here are the three main approaches to calculating GDP:

  Expenditure Approach: This widely-used method calculates GDP by adding up all
expenditures on final goods and services within a country. The formula is:
GDP=C+I+G+(X−M), where (C) is consumer spending, (I) is business investment, (G) is
government spending, (X) is exports, and (M) is imports.
 Income Approach: This method sums all income earned from the production of goods
and services. The formula is:
GDP=Wages+Rent+Interest+Profits+Depreciation+Net Foreign Factor Income+Indirect
Taxes−Subsidies
It reflects that total expenditures in an economy equal total income generated.
 Production (Output) Approach: Also known as the value-added method, this approach
calculates GDP by summing the gross value added by all industries. The formula is:
GDP=Gross Value Added+Taxes on Products−Subsidies on Products
Gross Value Added is determined by subtracting intermediate consumption from the
value of output.

India’s GDP

India’s GDP has experienced significant growth, establishing it as one of the world’s largest
economies. As of 2023, India’s GDP is approximately $3.57 trillion, ranking it fifth globally.
Projections suggest it could reach $6 trillion by 2029.

India’s real GDP growth rate for 2023 is estimated at 7.83%, outperforming many major
economies. This growth is driven by economic liberalization policies since the 1990s, which
have promoted trade and reduced public monopolies.

Despite global economic challenges and the COVID-19 pandemic, India’s economy has shown
resilience. Key sectors like manufacturing, services, and digital technology have fueled this
expansion. However, challenges such as income inequality, infrastructure deficits, and the need
for further reforms remain.

1. Effects and fluctuations in India’s GDP:

India: Gross domestic product (GDP) in current prices from 1987 to 2029 (in
billion U.S. dollars)

The statistic shows GDP in India from 1987 to 2023, with projections up until 2029. In 2023,
GDP in India was at around 3.57 trillion U.S. dollars, and it is expected to reach six trillion by
the end of the decade.

The newly independent Indian government chose to implement a mixed economy in the 1950s
and 60s, incorporating aspects of both the capitalist and socialist systems. This choice led to
enormous inefficiencies stemming from the interventionist culture that was a direct result of the
system's flaws and the policy's poor execution. One of the many obstacles that prevented the
Indian government from implementing a mass planning system akin to the Soviet one was an
untrained labor force.

The economy started to recover when the government of the early 1990s saw the large-scale
establishment of small-scale industry as a result of the removal of price controls. However, with
the fall of the Soviet Union, India's principal trading partner, the detrimental effects of socialist
policy on the economy were revealed, and it underwent a significant liberalization. At the start of
the twenty-first century, India's economy was quickly moving toward being a free market. India
has continued to grow and is currently a member of the BRICS group of rapidly rising
economies. In the ten years that the current Modi administration has been in office, India's GDP
has doubled.

2.How change in India’s GDP would impact society’s economic well-being:

India: Real gross domestic product (GDP) growth rate from 2019 to 2029(compared to
the previous year)

The statistic shows the growth of the real gross domestic product (GDP) in India from 2019 to
2023, with projections up until 2029. GDP refers to the total market value of all goods and
services that are produced within a country per year. It is an important indicator of the economic
strength of a country. Real GDP is adjusted for price changes and is therefore regarded as a key
indicator for economic growth. In 2023, India's real gross domestic product growth was at about
7.83 percent compared to the previous year.
The focus of attention has shifted in recent years from other economic powers to the growing
economies of the BRIC nations—Brazil, Russia, India, and China. Compared to historically
robust economies like the US and Germany, the BRIC countries' GDP is growing at an
overwhelmingly faster rate.
By almost all measures, the United States has the greatest economy in the world, but China has
the second-highest percentage of GDP worldwide, and India is vying with Japan for third place.
India maintained remarkable GDP growth rates in 2008 and 2009 despite the global recession,
particularly considering that the majority of the world saw negative growth in at least
one of those years.
India's prosperity can be attributed in part to the economic liberalization that took place in 1991,
which promoted trade and led to the dissolution of some public monopolies. The recent
slowdown in GDP growth is partly attributable to the surge in inflation. India's labor force is
increasing in the industrial and service sectors, partly due to global outsourcing, which is
beneficial for the country's economy. The agriculture sector in India is still a worldwide giant,
producing more wheat or tea than anyone in the world except for China. Nonetheless, India's
unemployment rate is still somewhat high despite the country's fast population growth and
extensive mechanization of many operations.

3. Challenges faced by India for its economic growth

Looking back at India's rapid economic expansion, two major turning points led the
economy to become the world's fifth-largest:

 Between 2002 and 2012, India, focusing on information technology outsourcing

services, lagged China—which heavily invested in manufacturing. However, after
initiating the "Make in India" policy back in 2014 and further easing foreign
investment restrictions, India's economy began to catch up, surpassing China's GDP
growth rate between 2015 and 2016. At that time, China faced challenges such as
overcapacity, the U.S.-China trade war, and the failure of currency reforms. This
marked the first turning point between the two Asian giants.

 The period from 2020 to 2023 can be considered the second major turning point. In
2021, India's GDP growth rate once again exceeded China's, and in April of the
same year, it officially became the world's most populous country. China's
population then declined year-on-year for the first time in 2022. From an economic
 standpoint, India is also expected to have a larger proportion of young people in
its labour force in absolute terms than China before the end of ‘the twenties’.

With such advantages, India—a consumption-driven economic structure similar to the

United States—maximizes its industrial upgrading and demographic dividend, allowing it
to maintain impressive economic growth despite a slowdown in global
trade, manufacturing and frequent geopolitical risks throughout 2023. Observing the
details of expenditure, one key factor contributing to India's GDP growth exceeding
expectations is the nearly 60% share of private consumption. Despite the high base
pressure over the past two years, this category maintained stable growth rates of 2.83%,
5.97%, and 3.13% in Q1-Q3. The year-on-year growth of personal bank loans—a measure
of consumer willingness to spend—reached 32.6% in October, hitting a new high. In
September, the Consumer Confidence Survey Index also jumped, surpassing pre-pandemic
levels, cementing the fact that household spending played a pivotal role in economic
momentum. Another key factor comes from the second-highest share of GDP, gross fixed
capital formation. With a year-on-year growth rate reaching 11.3% in Q3, this reflects the
continued vibrancy in domestic investment demand. This is mainly due to accelerated
investment by global manufacturing companies and the government's efforts to attract
foreign investment through expanding infrastructure investments.

4.Methods that can enhance India’s economic growth

India's GDP has to grow 8% every year for the country to become a developed economy by
2047, World Bank's Anna Bjerde told CNBC-TV18 in a recent conversation. How can
India get to an annual growth of 8%?
India, too, has lifted 400 million people out of poverty. Still, India's economic growth pace
is nowhere close to the enviable annual average of 9% that China has clocked since President
Deng Xiaoping initiated economic reforms in 1978. Eight hundred million people have emerged
out of poverty in China since then.

India, too, is on a path to reformation, but the pace of reforms must be faster for better economic
growth.
The International Monetary Fund (IMF) and Nomura, a global investment bank, expect India's
gross domestic product (GDP) to grow 7% in 2024.

India, despite its rapid economic growth, faces several significant challenges:

 Poverty and Income Inequality: Widespread poverty and a large income gap persist,
with many still living below the poverty line, hindering inclusive growth and social
cohesion.
 Unemployment and Underemployment: Creating enough job opportunities, especially
for the youth, remains a challenge, with issues of both unemployment and
underemployment.
 Agricultural Distress: The agricultural sector, employing a large portion of the
population, struggles with low productivity, lack of modernization, and vulnerability to
price fluctuations and climate change.
 Infrastructure Deficit: India’s infrastructure lags behind, requiring significant
investments in transportation, energy, and digital networks to support economic growth.
 Fiscal Challenges: Managing the fiscal deficit and public debt levels is an ongoing issue,
with high deficits potentially leading to inflation and economic instability.
 Private Investment and Manufacturing: Private sector investment has been weak, with
declining gross capital formation and underperformance in key manufacturing sectors
like apparel and electronics.
 Human Capital Development: There is a need for improved education and healthcare,
as a significant portion of children struggle with basic literacy, impacting future
workforce readiness.
 Environmental Sustainability: Balancing industrialization and urbanization with
environmental preservation is crucial, addressing issues like pollution, deforestation, and
climate change.
 Uneven Economic Recovery: Post-pandemic recovery has been uneven, with the rich
thriving while the poor struggle, leading to increased household debt and financial strain.
  Global Economic Headwinds: External factors such as high interest rates, geopolitical
tensions, and sluggish global demand pose challenges to India’s growth and export
performance.

Addressing these challenges is essential for India to sustain its economic growth and achieve
more inclusive development.

 Conclusion:

India's economic landscape has undergone significant transformations since its independence,
evolving from a mixed economy characterized by socialist policies to a more liberalized market
approach. As of 2023, India's GDP stands at approximately $3.57 trillion, with projections
indicating it could reach $6 trillion by 2029. This growth trajectory can be attributed to various
factors, including the economic liberalization initiated in the early 1990s, which facilitated trade
and reduced public monopolies. Despite these advancements, India faces critical challenges that
threaten its economic stability and inclusive growth. High levels of poverty and income
inequality persist, alongside issues of unemployment and underemployment, particularly among
the youth. The agricultural sector, while significant, suffers from low productivity and
vulnerability to climate change.

Moreover, infrastructure deficits hinder economic progress, necessitating substantial investments

in transportation and energy. Fiscal challenges also loom large, with high public debt and deficits
posing risks of inflation. To counter these obstacles, India must adopt strategic measures such as
enhancing infrastructure investment, promoting private sector participation, and boosting
manufacturing and exports through initiatives like "Make in India." Agricultural reforms aimed
at modernizing farming practices and improving skill development are essential for creating job
opportunities. Additionally, fostering innovation and digitalization will be crucial in navigating
global economic headwinds. By addressing these multifaceted challenges through targeted
strategies, India can sustain its economic growth and work towards a more equitable society.

References:
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 Bhattacharya, B. B., & Kar, S. (2025). Long run growth prospects for the Indian
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