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 India’s economy are brighter than for other emerging markets. After a slow start, Mr Modi’s 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. 

Year

GDP (billions of $)

Nominal

PPP

2020 3,639.8012,708.3

6

2019 3,311.7511,565.7

4

2018 3,012.9010,528.7

8

2017 2,755.83 9,574.55

2016 2,510.60 8,722.55

2015 2,308.02 7,996.62

2014 2,049.50 7,375.90

2013 1,875.16 6,783.66

2012 1,835.82 6,252.67

2011 1,843.02 5,845.36

2010 1,708.46 5,370.62

2009 1,365.37 4,812.08

2008 1,224.10 4,402.48

2007 1,238.70 4,156.08

2006 949.12 3,686.98

2005 834.22 3,273.78

2004 721.59 2,902.27

2003 618.37 2,619.03

2002 523.77 2,378.85

2001 493.93 2,254.78

2000 476.64 2,100.67

1999 466.84 1,975.41