India’s latest GDP growth figures have faced criticism from former bureaucrats and policymakers regarding issues ranging from allegedly “sharp revisions” of previous quarter prints to a perceived lack of transparency in employing the double deflation method to compute estimates of real GDP.
Ministry of Statistics and Programme Implementation (MoSPI) Secretary Saurabh Garg counters these criticisms in an interview with Shubham Rana, and asserts that the new GDP series was compiled after extensive consultations with stakeholders and discussion papers. For more transparency, the ‘Sources and Method’ document for the new series will be released in September, he says, adding that back-series data based on new series will be published by the end of the current year.
Edited excerpts:
Q. How would you respond to the criticisms over the GDP estimates?
A. GDP estimates are compiled using a well-established statistical framework, based on the internationally accepted System of National Accounts. The new GDP series with base year 2022-23 has further strengthened this framework by incorporating newer data sources, improved estimation methods and better coverage of economic activities. We have been evaluating all the raised points/feedback. We attempted to explain many of the points.
Mixing an old-series nominal GDP denominator with a new-series numerator yields invalid growth rates. The changes in nominal estimates in new series over old series, are mainly due to incorporation of methodological improvements such as use of Annual Survey of Unincorporated Sector Enterprises (ASUSE) and Periodic Labour Force Survey (PLFS) data for estimates of Unincorporated Sector Enterprises compared to proxy indicators due to non- availability of regular annual data in old series, etc.
Adoption of the internationally acclaimed double deflation method for the input-intensive manufacturing sector in the new series has accurately captured the real GVA in the new series compared to the single deflation method, by which the movement of both output and input prices were kept the same.
For more transparency, we are going to release the ‘Sources and Method’ document of new series in September. Also, we plan to release back-series by end of the current year.
Q. What are the sources for the price indices being used for double deflation? What data is being used for input prices for double deflation?
A. The transition to double deflation was not sudden. It was built on extensive experiments and detailed analysis using historical time-series data from the Annual Survey of Industries (ASI) spanning the period of 2011-12 to 2023-24, Supply Use Tables (SUT), WPI of the 2011-12 series and PPI series under the guidance of ACNAS.
Further, the Department for Promotion of Industry and Internal Trade (DPIIT) initiated the exercise for compilation of Output Producer Price Index (PPI) and hence, the base revision of GDP was an opportune time to introduce double deflation.
Although named ‘output PPI,’ the expanded commodity basket released by DPIIT tracks ex-factory basic prices for final goods as well as a comprehensive set of intermediate goods used as inputs across industries such as bauxite, coking coal, electricity, refined palm oil, and cement. Item-level price indices from the output PPI are mapped directly to around 1,000 unique input item structures drawn from ASI data for 28 manufacturing compilation categories.
Q. Even before the new GDP series was introduced, large revisions to GDP growth figures were an issue. Can we expect less steep revisions to growth numbers in the new GDP series?
A. While periodic revisions remain a standard and necessary feature of national accounts as preliminary estimates transition into final estimates upon receiving complete administrative and corporate accounts, growth rate revisions in the new series are expected to be significantly more stable.
Reconciling production-side Gross Value Added (GVA) and expenditure-side GDP often resulted in sizeable statistical discrepancies due to different data sources used in their compilation. In the new series, compilation of GDP by production and expenditure approaches has been integrated with the Supply and Use Tables (SUT) framework. SUT acts as a balancing matrix, ensuring that input-output balances and commodity flow match across all sectors rather than relying on mathematical smoothing or unverified residual balances.
Q. India could not develop PPI for decades despite several attempts because producers would not share prices. How has this been addressed in the new PPI series?
A. The perception that creating a PPI required establishing entirely new, inaccessible price-collection channels from unwilling producers is incorrect. Under the previous 2011–12 series, price quotations for compiling the WPI for manufactured products were already collected directly from factory floors as ex-factory basic prices, excluding downstream Goods and Services Tax (GST) and transport costs.
Because the physical source of price collection, the factory gate, remained identical, the logistical mechanism for gathering producer quotations was already institutionalized.
The primary advancement of the new PPI lies in incorporating export prices to capture external demand and aligning valuation principles strictly with national accounting basic prices, rather than changing how factory quotations are gathered from producers. The response rate is good with respect to price collection for PPI.