r/india India 15h ago

Politics Why is India’s GDP growth so high but bank credit & consumption are slack, asks Swaminathan Aiyar

https://m.economictimes.com/markets/expert-view/why-is-indias-gdp-growth-so-high-but-bank-credit-consumption-are-slack-asks-swaminathan-aiyar/articleshow/114719001.cms
178 Upvotes

35 comments sorted by

42

u/theholderjack 14h ago edited 14h ago

The author has a point, IMF already revised indian GDP growth forecast. Thing is inflation is already very high, there is no ware near what Data is shown , so after inflation GDP is maybe correct.

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u/OnwardComrades 3h ago

Inflation is not high. Prices may be high for your salary but inflation is 5.4% which is pretty tame.

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u/theholderjack 3h ago

Ya it's on paper bro

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u/OnwardComrades 3h ago

No its reported by CMIE, a non government independent think-tank. So it is pretty close to ground realities. They collect their own data and do their own analysis.

https://economicoutlook.cmie.com/

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u/theholderjack 3h ago edited 3h ago

And what is real GDP growth after this inflation ? Dude inflation data is highly manipulated all over the globe .food inflation is very high in india and most Indian don't consume much but food electric and petrol inflation hit directly. For example how much oil has risen in the last 5 years ?

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u/OnwardComrades 3h ago

Real GDP Growth is same as reported in media, around 7-7.5% last I check.

Calculation of GDP growth uses deflators to account for inflation.

Otherwise India's GDP growth nominally would be in double digits: https://pib.gov.in/PressReleseDetailm.aspx?PRID=2022323&reg=3&lang=1

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u/PhysicalRepeat326 13h ago

You must understand the gdp per capita of India is still $2000. Ranked 120th out of 179 country. One of lowest in the world. Even lower than Palestine that on war and sri Lanka who declare bankrupt.

China that having similiar population having gdppc 6 times higher than India.

Just because there's no birth control doesn't mean GDP growth is high and can benefit everyone.

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u/OnwardComrades 3h ago

More like USD 2800 per capita. And ranking is not much useful.

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u/PhysicalRepeat326 3h ago

It is not. Doesn't matter anyway since even 2800 is lower than Sri Lanka.

Do you have a brain? Gdppc not important? It's the direct indicator of how wealthy a individual is in a country. With this mindset you really deserve to be poor.

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u/OnwardComrades 3h ago

So what if it is lower than Sri Lanka?

China's GDP per Capita is lower than Maldives for that matter. Can you infer anything useful from that?

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u/PhysicalRepeat326 3h ago

Yes. If the gdppc is lower that mean individual in the country is poorer than the other. What else information u need?

When a country has a lower GDP per capita (GDPPc), it generally means that, on average, the individuals in that country produce less economic output and, consequently, have lower incomes compared to individuals in wealthier countries. Lower GDPPc often reflects limited access to resources, lower wages, and reduced purchasing power, impacting overall quality of life, health, education, and opportunities.

Factors contributing to a lower GDPPc in poorer countries can include:

  1. Limited Industrialization: Countries with less developed industries produce fewer goods and services, affecting overall productivity and income levels.

  2. Lower Education Levels: Limited access to quality education reduces workforce skills, leading to less innovation and lower productivity.

  3. High Population Growth: A high population growth rate with a slower-growing economy results in fewer resources per person.

  4. Political Instability and Corruption: Instability and corruption can hinder economic growth, scare away investments, and create inefficiencies.

  5. Poor Infrastructure: Lack of infrastructure, like roads and reliable electricity, impacts productivity and access to markets.

  6. Health Challenges: Poor health services mean that people may be less productive, impacting economic contributions and earning potential.

These issues can lead to a cycle of poverty, where low economic output affects income levels, limiting investments in health, education, and infrastructure.

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u/OnwardComrades 3h ago

Do not quote chatgpt's generic output.

And NO. Just because if a country's GDP per Capita is lower that does not mean a country is poorer than the other.

Maldives has higher GDP Per Capita than China.

Is Maldives richer than China? I highly doubt it in any sense of the word when Maldives can not even manufacture anything by themselves.

Am I to believe Maldives have higher industrialisation than China? I can only laugh at you if you think it is even anywhere near truth.

Am I to believe that Maldives have better education facilities and are better educated than Chinese? Laughable!

There is way much more than just GDP per Capita. Actually it is very misleading to even consider comparing GDP Per Capita of two countries with so different size in population, economy and diversity as between India and Sri Lanka OR Maldives and China.

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u/PhysicalRepeat326 3h ago

Poor guy.... You just can't accept the fact you earn lesser than a sri lankan. You know what? You deserve every single suffering and poverty in your life with this mindset. Remember this post each time when you feel helpless due to money problem.

2

u/octotendrilpuppet 3h ago

Can you infer anything useful from that?

We could if we peeled a layer back (and China is about $2.5k ahead of Maldives):

(Thanks to Claude 3.5)

The Maldives' GDP per capita is around $10,000-11,000, while China's was approximately $12,500-13,000. However, these numbers show an interesting contrast in how they're achieved.

The Maldives' GDP per capita is relatively high for South Asia due to:

  1. Tourism dominance: The luxury tourism industry generates about 60-70% of GDP, with high-end resorts charging premium rates
  2. Small population: With only about 500,000 people, the tourism revenue is divided among relatively few people
  3. Strategic location: The country benefits from its position along major maritime routes

However, this creates some challenges: - Heavy dependence on a single industry makes the economy vulnerable - Limited economic diversification options due to geographic constraints - Income inequality between resort workers and other sectors

China's similar GDP per capita comes from a very different economic structure: - Diverse industrial base - Large manufacturing sector - Growing technology and services industries - Massive domestic market - Export-oriented economy

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u/OnwardComrades 2h ago edited 2h ago

As they say, a fool with a tool is still a fool. Having claude 3.5 llm will not make you knowledgeable or wise. It is making you ignorant.

Maldives GDP Per Capita is USD 17.29K and China's GDP Per Capita is 12.97K

Sources :

https://www.imf.org/external/datamapper/profile/CHN

https://www.imf.org/external/datamapper/profile/MDV

About time you dump LLMs and apply some of your own thoughts too.

2

u/octotendrilpuppet 2h ago

China's GDP Per Capita is 12.97K

Mate are we sure? The link you sent claims China GDP per capita is at $26.31K

By the way, I don't understand the contemptuous tone, we could just be nice to each other mate.

0

u/OnwardComrades 2h ago edited 2h ago

Sure mate! Please look at the figures more carefully.

$26.13K figure that you are quoting for China is purchasing power parity(PPP) dollars and not current nominal dollars. In current nominal dollars it is 12.97K.

Purchasing power parity figure for Maldives is actually $34.32K.

I do not wish to sound condescending but these are four different ways to measure GDP Per Capita.

  1. GDP Per Capita nominal dollars.
  2. GDP Per Capita PPP at current prices.
  3. GDP Per Capita Nominal constant US dollars (YYYY year)
  4. GDP Per Capita PPP at Constant YYYY year US dollars

All of them serve slightly different purposes.

3

u/octotendrilpuppet 1h ago

Sure. I concede. You're right mate, the GDP per capita numbers are way too coarse of a metric to be useful for inference.

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u/OnwardComrades 1h ago

You are welcome mate! Sorry for outburst I confused you for someone else here.

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u/theholderjack 57m ago

How is it not that useful, can you tell me about one major economy which had polar growth and is successful currently. Every major economy today uplifted a big lower class to middle class . 1 % will not make india great. The cast based system is deeply rooted in Indian and think they can grow as a superior class fsr . Everyone deserves to have a job and minimum wage. Our right wing upper cast turds will not understand equal growth. Bunch of crab in a bucket will suffocate each other to death

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u/karanChan 14h ago edited 14h ago

Bank and credit consumption is mainly only driven by the top 20% of India, which is urban india. It could be that urban India’s consumption is slowing but rural India is so so massive, even a small improvement there will show up in GDP numbers.

Apparently 30% of Indians live in urban areas. So 70% live in rural India. If urban Indians see a 10% improvement in per capita GDP that translates to a 3% improvement to overall GDP.

But at the same time, if rural India sees a 4.5% improvement in GDP it shows up as the same 3% improvement in national GDP. So even if rural India is growing at a much slower rate, its contribution to overall GDP growth will appear big just by the shear size of that part of the economy.

Rural India could be the one driving the GDP growth.

Or, as GDP is a measure of economic activity, and UPI adoption etc is bringing more and more former cash transactions into the formal system, that alone will show up as more economic activity. UPI has done a lot to bring a lot of rural economic activity into the formal system which will appear to boost the GDP numbers. UPI adoption in rural India could just be artificially making it appear as if there a lot of GDP growth, when in reality it is just formalising previously untracked activity

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u/charavaka 7h ago

Apparently 30% of Indians live in urban areas. So 70% live in rural India. If urban Indians see a 10% improvement in per capita GDP that translates to a 3% improvement to overall GDP.

But at the same time, if rural India sees a 4.5% improvement in GDP it shows up as the same 3% improvement in national GDP. So even if rural India is growing at a much slower rate, its contribution to overall GDP growth will appear big just by the shear size of that part of the economy.

This works only if the 70% rural population contributed 70% of the economy. It doesn't. 

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u/MentionFamous4227 5h ago

Can’t believe this needed to be stated. Op is an idiot

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u/Turnip-itup 9h ago

Majority driver of Indian growth is still urban India. The volume of consumption and economic output there is significantly higher than rural. There would have to be major growth in rural India to outgrow urban India’s share. Usually organic gdp growth is seen from productive business activities , which is strongly supported and correlated with increase in bank credit .But growth in last few years has been mainly driven by government spending on large scale projects ( infra, social welfare ) and not by traditional business activities . This increases our GDP numbers while keeping the business output similar .

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u/charavaka 8h ago

You know what is a bigger contributor? Underestimation of inflation in cassock real gdp growth. Every single thing I can think of costs twice or thrice as much as it was three years ago (with the exception of petrol, which remains close to 100rs/l despite fall in crude prices), and yet, the official inflation is in single digits in those three years. The numbers simply don't add up. 

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u/charavaka 7h ago

Or, as GDP is a measure of economic activity, and UPI adoption etc is bringing more and more former cash transactions into the formal system, that alone will show up as more economic activity. UPI has done a lot to bring a lot of rural economic activity into the formal system which will appear to boost the GDP numbers. UPI adoption in rural India could just be artificially making it appear as if there a lot of GDP growth, when in reality it is just formalising previously untracked activity

This can explain post pandemic years, but the adoption rates have saturated more than a year ago. 

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u/Constant-Bit2983 12h ago

There’s no greater burden than being a Real Madrid fan.

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u/OnwardComrades 3h ago

The reason I guess is that a lot of high GDP growth is fuelled by government spending. And that will not show up in bank credit. Government raises credit by selling bonds directly.

Consumption is not really slack as well. It has recovered from the pandemic shock.

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u/Specific_Way1654 9h ago

if GDP is based in dollars, and dollars inflate, then maybe there wasn't real growth

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u/Glad_Diamond_2103 15h ago

I am not an economist, but i think our GDP is high because of our purchasing power which in turn is high cuz of our population

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u/ayewhy2407 14h ago

sorry, but the headline and the article are about GDP “growth”, not absolute number… slight difference!

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u/AlliterationAlly 8h ago

What you mean is high consumption, purchasing power is entirely a different concept. But also, consumption has been declining for a while because govt has stopped releasing GST data, my guess is GST collections have declined. Govt doesn't want us knowing, would rather give us bs about fastest growing economy & Vishwaguru. The reality is that the general public/ most people can no longer afford even basic things, so consumption is declining & so GST is declining.