Noida, Sep 2 (APAC Media): The Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday clarified the methodology behind the latest quarterly GDP estimates, saying the negative implicit GVA deflator in manufacturing should not be interpreted as a fall in manufacturing prices.
The clarification, issued days after the release of the revised GDP series with 2022-23 as the base year, addressed queries over the double-deflation methodology, implicit GVA deflators and revisions to historical GDP estimates.
Manufacturing GVA grew 9.2 per cent in real terms in the April-June quarter, while nominal GVA growth stood at 7.7 per cent. This resulted in a negative implicit GVA deflator of 1.5 per cent.
MoSPI said the figure should not be interpreted as evidence that manufacturing prices had declined.
“A negative inflation in the implicit deflator in manufacturing does not mean that manufacturing prices have fallen. It is important to distinguish between the price deflators of output and inputs and the implicit Gross Value Added (GVA) deflator,” the ministry said.
Explaining the methodology, MoSPI said the revised estimates use a double-deflation approach under which output and intermediate consumption are deflated separately. The framework incorporates the newly introduced Output Producer Price Index (PPI) and Banking Services Price Index (BkSPI), among other indicators.
“Under the double-deflation approach, when input prices increase faster than output prices, the relative price movement can result in nominal GVA growing more slowly than real GVA. Consequently, the implicit GVA deflator can show negative inflation even though both output and input prices are rising,” it said.
The ministry said such movements are not unique to India and cited OECD research showing that economies using double deflation can record volatile or negative manufacturing deflators, particularly during periods of energy and raw-material price shocks.
Within Indian manufacturing, sectors such as basic metals, textiles and plastic products recorded faster increases in input prices than output prices during the quarter, contributing to the overall movement in the implicit deflator.
Agriculture, meanwhile, recorded a positive GVA inflation rate of 3.9 per cent, supported by a 5 per cent increase in the output Producer Price Index covering agriculture, forestry and fishing.
MoSPI also rejected suggestions that historical GDP estimates had been retrospectively altered to artificially boost the latest growth rate.
“The comparison of the Q1 GDP estimates needs to be understood in the context of the revisions made to the GDP series. The change in the estimate does not represent a downward revision made to make the current year’s growth appear higher. It reflects successive methodological and data revisions,” the ministry added.
The ministry maintained that the revised quarterly indicators are intended to capture underlying economic activity and are not adjusted to artificially inflate current growth estimates.
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