1 day ago
New GDP series expands double deflation across manufacturing categories
The government has created a new way to measure India’s economy.
It now compares price changes for both the things factories make and the things they buy.
This method is called double deflation.
It is being used in 28 of 30 manufacturing categories.
Two categories still use an older method because many of their materials are imported.
The government says matching those imported materials with detailed output prices is difficult.
The new GDP series uses 2022-23 as its starting year.
It also changed estimates for the informal household sector and reduced its measured value in 2022-23.
Household savings in gold and silver ornaments were measured at a much higher level than before.
Double deflation was used in 28 of 30 manufacturing categories in India’s new GDP series.
The meat, fish, fruit, vegetables, oils and fats category and pharmaceutical manufacturing still use single extrapolation.
MoSPI cited high imported-input shares and difficulties matching inputs with item-level output Producer Price Index data.
The new series uses 2022-23 as its base year and introduced output PPI-based double deflation in August estimates.
The series also revised household-sector GVA downward by Rs 2.9 lakh crore in 2022-23, while gold and silver household savings increased.
- Who
- The Ministry of Statistics and Programme Implementation, including Secretary Saurabh Garg, and users of India’s GDP data.
- What
- The new GDP series’ methods document says double deflation is used in 28 of 30 manufacturing categories, while also explaining revisions to informal-sector GVA and household savings estimates.
- Where
- India’s national accounts and GDP statistical system.
- When
- The methods document was released on Monday, seven months after the new GDP series was released in February; output PPI-based estimates were published at the end of August.
- Why
- To improve estimates of real economic growth by adjusting output and inputs using their respective price changes, while incorporating updated data sources and methods.
Critics of the new estimates
MoSPI’s explanation
Downward revisions to the economy
Critics of the new estimates
Critics have objected to lower nominal GDP and household-sector GVA estimates in earlier years, arguing that the revisions can affect how economic growth appears.
MoSPI’s explanation
MoSPI Secretary Saurabh Garg said improved measurement of the informal sector caused downward revisions in some categories and better reflected the economy’s structure.
Faster reported real growth
Critics of the new estimates
Some observers viewed lower nominal GDP in the April-June period mentioned in the article as making reported real growth of 7.8% appear faster than expected.
MoSPI’s explanation
MoSPI presents the new methodology, including double deflation and improved informal-sector estimates, as an effort to measure real growth more accurately rather than to produce a particular result.
Use of double deflation
Critics of the new estimates
The continued use of single extrapolation in two manufacturing categories leaves a limitation in the transition to the preferred method.
MoSPI’s explanation
MoSPI says work is underway to apply double deflation to those categories, but high imported-input shares make direct input-output price matching challenging.
Key facts
- GDP base year
- 2022-23
- Manufacturing categories using double deflation
- 28 of 30
- Categories still using single extrapolation
- Meat, fish, fruit, vegetables, oils and fats processing; and pharmaceutical, medicinal chemical and botanical products manufacturing
- Main measurement change
- Output and input values are adjusted using their respective inflation rates
- Household-sector GVA revision
- Down by Rs 2.9 lakh crore in 2022-23, or 2.7%, compared with the old series
- Household gold and silver savings
- Rs 1.65 lakh crore in 2022-23, compared with Rs 64,504 crore under the earlier estimate
- Methods-document timing
- Released seven months after the new GDP series, which MoSPI said was its shortest such interval
Quotes
Ministry of Statistics and Programme Implementation
India’s government statistics ministry, cited in its Sources and Methods report
“The transition to double deflation marks a major step forward in capturing true economic growth, aligning with global standards and modern statistical practices”
indianexpress.com
“We will come out with a set of Frequently Asked Questions if there are lots of questions on the Sources and Methods”
indianexpress.com
Sources
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