First Advance Estimates (FAEs) – GDP

First Advance Estimates (FAEs) – GDP

News: The First Advance Estimates (FAEs) from the Government of India indicate a projected GDP growth of 7.3% for the current financial year (2023-24).

What are FAEs?
• The First Advance Estimates (FAEs) are released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, Government of India.
• The FAEs provide an early estimate of the economic performance of the country, specifically the Gross Domestic Product (GDP), for the current financial year.
• These estimates are based on data from various Ministries/Departments/Private Agencies for the first 6-8 months of the financial year.
• The estimates are compiled using the benchmarkindicator method, i.e., the estimates available for the previous year are extrapolated using relevant indicators reflecting the performance of sectors.
• The FAEs include estimates of Gross/Net National Income, Per Capita Income, and Gross Value Added (GVA) at Basic Prices by kind of economic activity, and the Expenditure Components of GDP.

What is the significance of FAEs?
• Budget Foundation: FAEs assume particular importance as they are the last GDP data released before the Union Budget for the forthcoming fiscal year, typically presented on February 1. They serve as the foundation for budgetary numbers.
• Contextual Significance for 2024: This year’s FAEs gain added significance due to the upcoming Lok Sabha elections in April-May 2024. While a full-fledged Union Budget may not be presented, the FAEs still play a pivotal role in shaping economic considerations.
• Insight into Government’s Economic Performance: The FAEs for this year provide a comprehensive snapshot of economic growth, offering insights into the economic trajectory during the ten years of the present government.

Which factors are main contributors of India’s growth?
• Private Final Consumption Expenditure (PFCE): Contributes nearly 60% to GDP.
• Gross Fixed Capital Formation (GFCF): Accounts for around 30% and involves investments in boosting the economy’s productive capacity.
• Government Final Consumption Expenditure (GFCE): Comprises about 10% of GDP.
• Net Exports: Reflects the net spending resulting from imports and exports.