The Finance Ministry on Wednesday asserted that perception in certain quarters that the latest GDP data points to “shallower” economic revival was misplaced, as economic commentators were not making a fair comparison after factoring in the data revisions to the GDP of the previous three years.
“The argument that the recovery has become shallower does not make sense since one is not making a fair comparison,” said Chief Economic Advisor Anantha Nageswaran in a statement.
There is much misunderstanding of the data released last evening on GDP for Q3FY23 because it came with revisions to the data of the previous three years, he added. “Has the recovery become shallower? No! We are not comparing ‘like for like’”.
To buttress his point, Nageswaran highlighted the movement of Private Final Consumption Expenditure (PFCE in constant prices) and Manufacturing Gross Value Added (GVA) in the third quarter under review.
Private final consumption expenditure
In the case of PFCE, Nageswaran noted that data revision to the prior year(s) had lowered the 6 per cent growth rate to 2 per cent in Q3FY23.
“Even though one is comparing consumption to consumption, one is comparing the cumulative base effect of the first revision to 2021-22, the second revision to 2020-21 and the third revision to 2019-20, all of which now inflate the base period data and depress the growth rate for 2022-23.
“So, really, one is comparing apples to oranges. When one set of data is revised to take into account underlying data revisions, larger samples, etc, and the other is not, it is not a like-for-like comparison,” he said.
Manufacturing GVA
Manufacturing GVA would have grown by 3.8 per cent year-on-year in Q3 FY23 without revised data. However, it has contracted by 1.1 per cent after revision. That is a change of 4.9 percentage points.
Similarly, Manufacturing GVA would have grown by 5.1 per cent YoY in FY23 based on Second Advanced Estimates without revised data. However, it will grow by 0.6 per cent after revision. That is a revision of 4.5 percentage points
“To reiterate, when one is comparing a data point that has gone through three or four revisions and another which is still called ‘advanced estimate’, one is not comparing apples to apples but apples to oranges,” he added.
Tuesday’s GDP revisions
On Tuesday, the Central Statistics Office — as part of the Q3 GDP announcements — maintained the Real GDP growth estimate for 2022-23 at 7 per cent. “It is possible to achieve this since we just need 4.1 per cent growth in Q4 to get to 7 per cent,” Nageswaran said.
The nominal GDP growth for 2022-23 is estimated at 15.9 per cent vs 15.4 per cent published on January 6, because nominal GDP for 2021-22, is slightly revised lower, he explained.
The nominal GDP for 2022-23 is now at ₹272.04 lakh crore vs ₹273.08 lakh crore estimated in January. Real per capita GDP for 2022-23 estimated at ₹1,15,490 as against ₹1,13,967 reported in January, reflecting an increase.
For 2021-22, real GDP growth has been revised higher from 8.7 per cent to 9.1 per cent. For 2020-21, real GDP contraction is revised to -5.8 per cent from -6.6 per cent; for 2019-20, real GDP growth has now been revised higher to 3.9 per cent from 3.7 per cent earlier.
For 2021-22, nominal GDP growth is estimated at 18.4 per cent vs 19.5 per cent earlier. For 2020-21, nominal GDP contraction maintained at -1.4 per cent, implying no change. For 2019-20, nominal GDP growth is estimated higher at 6.4 per cent now against 6.2 per cent earlier, the CEA statement highlighted.