Union Budget 2024 | FAQs: What is Real Economic Growth Rate?

Real Economic Growth Rate provides a more accurate picture of economic performance compared to nominal GDP growth, which includes the effects of inflation.

Finance Minister Nirmala Sitharaman will present the Union Budget on July 23, having already presented an Interim Budget ahead of the Lok Sabha elections. In light of the upcoming Budget, we take a look at some of the terms associated with the exercise.

The Real Economic Growth Rate refers to the rate at which India's Gross Domestic Product (GDP) grows or contracts in a given year, after adjusting for inflation. This is an important indicator as it reflects the actual increase in the value of goods and services produced by the economy, providing a more accurate picture of economic performance compared to nominal GDP growth, which includes the effects of inflation.

Key points about Real Economic Growth Rate in India:

Inflation Adjustment: Real GDP is calculated by adjusting the nominal GDP with a price deflator, which removes the effects of price changes (inflation or deflation) over the period. This gives a more accurate reflection of the economy's size and how it's growing.

Measure of Economic Performance: Real GDP growth is a crucial indicator of economic health. A positive growth rate indicates an expanding economy, while a negative rate might signal a recession.

Sectoral Contribution: India's GDP growth is driven by its three main sectors - agriculture, industry, and services. The contribution of each sector to GDP growth can vary, with the services sector often playing a significant role in recent years.

Annual and Quarterly Reports: The real GDP growth rate is reported annually and quarterly by the Ministry of Statistics and Programme Implementation in India.

Factors Influencing Growth: Various factors can influence India's real GDP growth, including domestic consumption, government spending, investments, exports and imports, and external factors like global economic conditions.

Historical Trends: Over the past decades, India has experienced varying rates of GDP growth. In recent years, India has been one of the world's fastest-growing major economies, although it has faced challenges such as high inflation rates, policy changes, and global economic conditions.

Policy Impact: Government policies, including fiscal stimulus, monetary policy, reforms, and infrastructure development, significantly impact the real economic growth rate.

The real economic growth rate is a vital metric for policy-makers, investors, and analysts to understand the economic trajectory of the country, assess its economic health, and make informed decisions.

(Disclaimer: This copy has been written by a generative AI tool and has been reviewed and edited by the DH Web Desk)

Union Budget 2024 | Making a record for any Finance Minister, Nirmala Sitharaman will be presenting her 7th Union Budget on July 23, 2024 under the Modi 3.0 government. While inflation has burnt a hole in the pockets of 'aam janata', will this Budget spell relief for Indians? Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.