National income data: a poll-eve talking point


National income data: a poll-eve talking point

The latest national income data released by the National Statistical Office (NSO)  has surprised many economists. On the  NSO’s estimate of a robust 8.4 % year-on-year growth in real gross domestic product (GDP) the 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 NSO data 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.

NSOs revisions: A factor behind the upgrades in the current fiscal’s income estimates, writes The Hindu  “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.”

GVA growth rate presents a truer picture:  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.”

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….”

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