The 7.3% GDP growth projection for FY24 by the National Statistical Office (NSO) takes into account a positive Rs 2.94 trillion contribution of discrepancy, which after allocation may result in a lower growth number, say economists.
Discrepancy is a statistical input in the expenditure side of calculating GDP – which is used to match the difference between GDP calculated via the gross-value-added (GVA) and demand side.
As per the first advance estimates released by the National Statistical Office (NSO) on Friday, the discrepancy was a positive of Rs 2.94 trillion – meaning the GDP calculated through the GVA method was higher than that of expenditure by the following amount.
“This was primarily due to a 12.5% higher growth seen in net taxes on products, which boosted the GDP growth to 7.3%,” said DK Pant, chief economist, India Ratings and Research. In FY23, the growth in net taxes on products was 10.1%.
In FY23, the discrepancy was negative at Rs 3.81 trillion. Post the adjustment of discrepancy, GDP growth in FY24 comes in at 3.2%, sharply lower than 7.3% forecasted by NSO.
The projected GDP growth in FY24 is 7.3%, 10 bps higher than FY23, but tha GVA growth is forecasted 10 bps lower at 6.9%.
IDFC FIRST Bank’s economist Gaura Sen Gupta said that discrepancies accounted for the majority of overall FY24 GDP growth (more than 50%).
Thus, once the discrepancy is allocated to other components within expenditure – it may depress GDP growth to some extent. When the data for provisional estimates is released, the actual GDP growth number could be lower, say economists.
“Several high-frequency indicators have slowed down in the second half as compared to the first. Since the first advance estimates projected GDP based on first 8-10 months of data, it seems that the growth is being overestimated,” said Sakshi Gupta, principal economist, HDFC Bank.
The exact quantum of overestimation couldn’t be gauged as the data on expenditure side available in the public domain is limited.
Former Chief Statistician Pronab Sen however says that there is no certainty whether discrepancy once allocated will depress growth, as there is a problem with the allocation mechanism.
“There is no hard and fast rule of allocating discrepancy. It’s only known once the data is out,” Sen said.