Question

As per The Economic Times report, dated April 11, 2023: "Electric Vehicle sales cross 10 Lakh mark in financial year 2022-23." Analyse the likely impacts of this news on Gross Domestic Product (GDP) and Welfare.

Hint:

The rise in Electric Vehicle sales boosts GDP through increased consumption, while also improving public health and environmental welfare.

Answer 1

- Impact on GDP:
The sale of Electric Vehicles (EVs) contributes to an increase in consumption expenditure, which is a component of GDP. With the surge in EV sales, the output in the automobile sector will rise, contributing positively to the Gross Domestic Product (GDP). Additionally, related industries, such as battery manufacturing, charging infrastructure, and renewable energy, will experience growth, further increasing the value of GDP. - Impact on Welfare:
The transition to Electric Vehicles is expected to improve environmental quality, as EVs produce less pollution compared to traditional vehicles. This contributes to higher social welfare by reducing air pollution, improving health outcomes, and promoting cleaner air. Furthermore, this shift may lead to reduced dependency on fossil fuels, improving energy security and reducing the impact of global oil price fluctuations on the economy. - Job Creation: The increasing demand for EVs may create jobs in manufacturing, charging infrastructure, and research and development.
- Improved Health Outcomes: Reduced emissions may lead to fewer respiratory diseases, contributing to better public health.
Conclusion: The growth in EV sales will positively affect GDP by increasing consumption and production, while enhancing welfare through environmental benefits and potential job creation.