The latest national income data released by the National Statistical Office (NSO) last week have generated a fair amount of excitement as well as bewilderment. While the markets have cheered the NSO’s estimate of a robust 8.4% year-on-year growth in real gross domestic product (GDP) in the October-December quarter, some economists have been hard pressed to reconcile the sharp differences of well over a 100 basis points between the official estimates and their projections that many of them had made. The release also posits that real GDP grew by 8.2% and 8.1%, respectively, in the first and second quarters of the current fiscal, 40 and 50 basis points quicker than it had estimated earlier. Full-year real GDP growth too is now forecast at 7.6%, 30 basis points faster than the 7.3% growth it had estimated as recently as in January. A factor behind the upgrades in the current fiscal’s income estimates is the NSO’s revisions to the estimates for 2021-22 and 2022-23. While the revisions to 2021-22 data have resulted in that year’s real GDP growth being raised by 60 basis points to 9.7%, a fallout is the consequent scaling down of 2022-23’s GDP expansion to 7%, from the earlier estimate of 7.2%. Given that revisions to a previous year’s data automatically alter the year-on-year pace of growth, the base effect is a crucial element that has to be factored in while gauging the import of the headline number.
In real productive sectors of the economy, third-quarter gross value added (GVA) growth slowed to 6.5%, from an upwardly revised 7.7% pace in the preceding July-September period, as output in the key rural agriculture, livestock, forestry and fishing sector contracted 0.8% year-on-year and growth momentum slowed sequentially across five of the other seven sectors that contribute to the GVA. That the GVA growth rate is a full 190 basis points slower than the GDP’s 8.4% pace is primarily because net indirect taxes are estimated to have surged 32% year-on-year in the last quarter, largely as a result of subsidy payouts, including on fertilizers, being drastically lower. To that extent, the GVA growth rate presents a truer picture of the health of the economy. And even on the demand or expenditure side, the data on private consumption spending and government consumption expenditure in the third quarter reveal a lack of traction. While private spending grew by a mere 3.5% year-on-year, government consumption spending actually shrank 3.2%. With the general election set to be announced any day now, the headlines around the NSO data serve as a poll-eve talking point. But there must be a sober analysis of the real state of the economy that draws on multiple statistical sets.
