In News:

The Ministry of Statistics and Programme Implementation (MoSPI) released the Provisional Estimates (PEs) of India’s Gross Domestic Product (GDP) and Gross Value Added (GVA) for the financial year 2024–25 (FY25), providing a comprehensive picture of the country's economic performance.

Understanding GDP and GVA

• GDP (Gross Domestic Product) measures the total expenditure in the economy, including consumption, investment, government spending, and net exports — representing the demand side.
• GVA (Gross Value Added) evaluates the income generated from the production of goods and services in different sectors — representing the supply side.
• The two are related by the formula:GDP = GVA + Taxes – Subsidies
• Both are reported in nominal terms (current prices) and real terms (adjusted for inflation).

Nature of Provisional Estimates

• The estimates are termed provisional because they include data from all four quarters but are subject to revision:
  • First Advance Estimates (FAE): January
  • Second Advance Estimates (SAE): February
  • Provisional Estimates (PE): May
  • Revised Estimates: Finalized over the next two years (in 2026 and 2027 for FY25)

Key Economic Indicators for FY 2024–25

• Nominal GDP
  • Estimated at ?330.68 lakh crore, showing a 9.8% growth over FY24.
  • In dollar terms (?85.559/USD), India’s economy reached $3.87 trillion.
  • However, this 9.8% nominal growth marks the third-slowest since 2014.

• Real GDP
  • Rose by 6.5%, reaching ?187.97 lakh crore.
  • The real GDP growth slowed from 9.2% in FY24, indicating reduced economic momentum.
• Sectoral GVA Performance
  • Overall GVA grew by 6.4%, down from 8.6% in FY24.
  • Sector-wise real GVA growth:
    • Agriculture & Allied Activities: 4.4% (up from 2.7% last year)
    • Industry (including Manufacturing & Construction): 6.1%
    • Services: 7.5% (notable growth in public admin, trade, and finance)
• Q4 FY25 Trends
  • Real GDP growth: 7.4%
  • Nominal GDP growth: 10.8%
  • Indicates a strong end-of-year performance.

Structural Insights and Concerns

• Manufacturing Weakness:Since FY20, manufacturing GVA CAGR (4.04%) lags behind agriculture (4.72%), signaling industrial stagnation.
• Employment Implications:Manufacturing’s sluggishness contributes to high urban unemployment and labour migration to rural/agricultural sectors.
• Consumption and Investment Revival:
  • Private Final Consumption Expenditure (PFCE) grew by 7.2%.
  • Gross Fixed Capital Formation (GFCF) increased by 7.1%, indicating investment momentum.

Significance for Policymaking

• The GDP data serves as a basis for fiscal planning, monetary policy decisions, and public investment.
• It highlights India’s position as one of the fastest-growing major economies, while also revealing structural vulnerabilities — particularly in manufacturing.
• For international comparison, real GDP is crucial as it neutralizes inflationary differences across countries.