Explainer: GDP reached a two-year low level, what does it mean by a big decline?
Q2 GDP Report: In the second quarter of the current financial year, the country's economy grew sluggishly to 5.4 percent. This is a two-year low level, before that the previous low level of GDP growth was 4.3 percent in the October-December quarter of 2022-23. China's GDP growth was 4.6 percent in the July-September quarter.
What is GDP: GDP i.e. Gross Domestic Product (GDP) shows the economy of any country. In the data released by the government on the evening of 29 November, the country's GDP growth fell to a two-year low of 5.4 percent. This decline in GDP was seen due to poor performance in the manufacturing and mining sector. Despite this, India remains the fastest growing major economy in the world. The country's GDP grew by 8.1 percent in the same period a year ago. It stood at 6.7 per cent in the April-June 2024 quarter.
GDP slows to 5.4 percent
According to the latest data, the country's economy grew at a rate of 5.4 percent in the July-September quarter of the financial year 2024-25. Earlier, the previous low level of GDP growth was 4.3 percent in the October-December quarter of the financial year 2022-23. China's GDP growth was 4.6 percent in the July-September quarter. Not only this, PFCE, which reflects consumer spending in the September quarter, declined to 6 percent. Earlier, it was 7.4 percent in the June quarter. Let's know what is GDP and what does it mean?
What is GDP?
Gross Domestic Product (GDP) is the total value of goods and services produced in any country in a year. You can also understand it in easy language in such a way that GDP is the same as the mark sheet of a student. Just as the student's year-round performance is reflected in his mark sheet, similarly GDP shows the economy of the country. Just as the marksheet shows the marks of different subjects. In the same way, GDP shows that there was a decline in the sector or which was the right figure?
If there is a decline in GDP data, then it means that the country's economy is slowing down. This shows that the country did not produce enough goods compared to last year and the service sector also declined. When GDP declines, it simply means that production in the country is decreasing. It affects people's income, employment and lifestyle. The country's Central Statistics Office (CSO) estimates GDP four times a year. GDP is estimated every three months. GDP growth figures are released every year. It is important for India to achieve GDP growth year after year so that the needs of the country's growing population can be met.
Why is it important for the common man?
GDP is important for the general public because it is an important factor of decision for the government and the people. Increasing GDP means that the economic activities of the country are going well and government policies are proving effective at the ground level. In simple language, it means that the country is going in the right direction. But if GDP is declining, it means that the government needs to focus on its policies. So that it can help in bringing the economy back on track. When the economy does well, people invest more money and increase production. But with the decline in GDP, people start saving money. In such a situation, the government gives money to the people through different schemes to promote more spending. So that they spend more and promote economic growth.
How about the sector?
The decline in GDP was due to the negative performance of manufacturing, mining and service sectors. Financial, real estate and professional services growth accelerated to 6.7 per cent in the second quarter from 6.2 per cent a year ago. Electricity, gas, water-supply and other people-intensive services grew by 3.3 per cent, much lower than the 10.5 per cent growth a year ago. The construction sector recorded a growth of 7.7 per cent in the second quarter, lower than 13.6 per cent in the same quarter last year.
What did the expert say?