A new document released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday provided a deeper look into India’s new GDP series, clarifying some issues raised by certain circles about the series, the computation of national income, and data sources.
The paper– ‘Sources and Methods for Compilation of National Accounts Statistics’ — sought to dispel doubts about the double deflation method, and listed items being measured for the first time.
After April-June GDP growth came in higher than expected at 7.8%, critics quickly pointed out several issues with the print and the underlying data. Critics had called for the release of the ‘Sources and Methods’ document to better assess the new series, including how much double deflation is actually performed.
MoSPI delivered, releasing the document at a record pace, within seven months of the new series’ release in February. In some previous GDP base year revisions, this document was either released after a lag of several years or not at all.
In the new GDP series with a 2022–23 base year, the government used several high-frequency administrative datasets and regular annual surveys, resulting in broader coverage, increased granularity, and enhanced estimate accuracy. Key improvements include measuring the household sector through annual surveys, using double deflation in the manufacturing sector to arrive at constant price estimates, and incorporating new data sources.
“These improvements have reduced reliance on benchmark indicators and enabled the direct use of more comprehensive and current information for estimating economic activity,” the ministry said.
One of the biggest talking points in the new GDP series is the use of double deflation instead of the single deflation used in the old series.
“Double deflation has the inherent advantage that it doesn’t assume output and input prices move together. The method is significant in constant price estimation of Manufacturing where input costs (say, raw materials or energy) change differently than output prices,” the ministry said.
Double deflation is used in 28 of the 30 categories in the manufacturing sector. Double deflation is not used in ‘production, processing and preservation of meat, fish, fruit, vegetables, oils and fats’ and ‘manufacture of pharmaceutical; medicinal chemicals and botanical products’. In both these categories, single extrapolation has been used.
In the electricity industry, MoSPI used own-account electricity generation by households through rooftop solar panels for the first time when estimating GVA of the household sector for electricity. Data on biogas plants installed under government schemes has also been included in the compilation of GVA estimates for biogas.
In compiling household savings, MoSPI now incorporates savings in shares, debentures, mutual funds, and hybrid instruments like Real Estate Investment Trusts (REITs) and Alternate Investment Funds (AIFs). Secondary market net investments are also included in the GDP compilation now.
To estimate GVA of the unincorporated sector, MoSPI uses GVA per worker from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and workforce estimates from the Periodic Labour Force Survey (PLFS), after adjusting with projected population.
For the construction industry, the material basket has expanded from 7 basic materials to a broader set of items. This now includes cement and cement products, iron, steel and metallic products, bricks and tiles, bitumen and bitumen products, glass and glass products, timber and wood products, fixtures and fittings, paints and varnishes, sand, stone, granite, marble and related products, and other construction materials.
The estimation of nationalised public sector banks under the sub-sector Deposit-taking Corporations except Central Bank has improved significantly. In the 2011-12 series, estimates were compiled using information available in the annual reports of individual banks. In the new series, data from the Statistical Tables Relating to Banks in India (STRBI) published by the Reserve Bank of India (RBI) are used. “This aligns the methodology adopted for public sector banks with that followed for private and foreign banks and ensures greater consistency in estimation,” the ministry said.
For quarterly GDP data, MoSPI exhaustively uses Goods and Services (GST) data to generate indicators at sub-sectoral and institutional sector levels in the new series. Besides GST data, there is increased reliance on various high frequency administrative data sources such as VAHAN database and public disclosures of various insurance companies
In the new GDP series, there have been sharp revisions to not only GDP growth rates but also sectoral compositions. GDP growth rates for the last three financial years ending FY26 were raised higher by 10 basis points each.
Sector-wise, revisions have been much more volatile. GVA generated by private corporations in construction in FY23 more than doubled to Rs 7.46 lakh crore under the 2022-23 GDP series from Rs 3.53 lakh crore estimated under the old series.
Agriculture, forestry, and fishing GVA for FY23 has been revised down 16% to Rs 90,278 crore under the 2022-23 base series from Rs 1.1 lakh crore estimated for the same year under the old 2011-12 series.
A sharp downward revision was also seen for ‘Trade, repair, hotels and restaurants’; road transport; and services incidental to transport.
Source: The Financial Express
