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The Wire
5 days ago
- Business
- The Wire
Along With the Base-Year Revision of GDP, We Need Transparency
The Union government is in the process of revising the base year of Gross Domestic Product from 2011-12 to 2022-23. Due to the complexity and enormity of the exercise, the revised series of data will only be made available on February 27, 2026. A discussion was organised on 'GDP Base Revision: Time to regain confidence' on June 16 at the India International Centre, in New. Delhi. The thrust of the discussion was to explain the methodologies adopted and the datasets utilised to estimate the Gross Value Added and the GDP. There are several concerns about the reliability of certain aspects of the 2011-12 series. The weakest area in the existing data system is the informal (or unorganised) segment of economy which contributes nearly one-third of non-agriculture GDP. For this segment, the estimates are generally prepared using what is known as the labour-input method for the base year, which are moved for subsequent years as per indicators like past trends, relevant corporate growth, volume index and so on. Categories For the purpose of surveys, enterprises are classified into two broad categories. One is the Own Account Enterprises (OAEs) i.e. those enterprises that do not employ hired workers on a fairly regular basis and the other is Establishments employing at least one hired worker on a fairly regular basis. Within the latter, enterprises employing six or more workers are categorised as Directory Establishments (DEs). In the 2011-12 series, base-year estimates of unorganised segments of Trade, Hotel and Restaurants, Telecom, Education, Health and many other sectors may have been estimated using a visibly higher GVA per worker of Establishments in rural and even DEs in urban areas. A logic used was that 'most of the establishments in urban areas are Directory Establishments, employing 6 or more workers'. The trade DE constituted amongst market units – merely 2.1% in number in the 67th (2010-11) round of the National Sample Survey Office's survey used in the base-year compilation of 2011-12. Almost similar was the structure of Trade Establishments (constituting 5.8%) in rural areas. The GVA per worker of urban Trade DEs was more than 2.4 times that of OAEs even though the latter accounted for more than 77% of enterprises. So it is quite feasible that the overall GVA in several unorganised sectors may have been over-estimated owing to use of only DE data. Unorganised sector Another issue is whether the indicator-based growth of the unorganised sector is being overestimated, resulting in higher growth of GDP. It is observed that the growth rate reflected by the relevant NSSO surveys was much lower during 2015-2022 than that reflected in the national accounts in Trade, Hotel and Restaurant, Health and Education. In all these sectors, a fixed or corporate sector growth is being applied to the unorganised sector also. Another area of concern is the owner-occupied dwellings, constituting almost 6% of the GDP. This is based on the 2011 census. Since no recent data of census is available, the new base year may have to use projections which may again turn out to be inaccurate when the new census results are released in 2027. Another example of possible over-estimation of GDP is the share of the informal segment in the Communication sector. As per official GDP data, it has increased to 7.8% in 2022-23 from 5.9% in 2011-12. It is well known that one of the major generators of revenue in the unorganised telecom sector was through the Public Call Office (PCO). Their number has been consistently and significantly declining – from 2.01 million in 2012 to 1.76 million in 2013 to 30,563 in 2023 and merely 15,374 in 2024. So, the increase in the share of the informal segment of the communication sector needs explanation. We hope that the new series will address this anomaly. Buildings In the Construction sector, pucca construction accounts for nearly 90% of total activity. Its GVA is estimated as a fixed proportion of the value of the construction materials (steel, cement, bricks, timber, bitumen and so on). This may also require a re-examination as there are changes in the mix of types of buildings, techniques of construction, productivity and inventories of building materials. Surprisingly, when the public and private corporate sector are practically on a construction spree – be it highways, airports or other infrastructure projects, the unorganised segment has grown relatively faster since 2011-12 as its share in construction has grown from 76.4% to 78.9% in 2022-23. Whether it is a reality confirmed by data or just the consequences of residuality inherent in the present methodology followed needs to be looked into by expert committees going into the revision of base year. In case of agriculture, a recent article by Jean Dreze and Christian Oldiges highlights the large gap between the cereal production (304 million tonnes in 2022-23) and authors' estimates of all its known uses (at most 235 million tonnes). High cereal inflation in recent years, despite the ban on exports and stock limits needs to be better understood and explained. Data sets The Ministry of Statistics and Programme Implementation, being a user of many datasets originating from states but mostly exercising no qualitative checks, may do well to take outside expertise in addressing the anomalies highlighted above. There is sufficient information on the possible drawbacks of using MCA-21 data for estimating the growth of even the organised sector. The MCA-21 is an e-governance initiative of the Ministry of Corporate Affairs or MCA. For example, the mismatch of actual and recorded activity, instances of non-traceability of units at the address provided, weak correlation between the actual production and the paid-up capital across sectors, are too well known to need reiteration. MCA-21 data set, undoubtedly a mine of details, requires a holistic and critical relook for its statistical utility for GVA estimation. The issue of palpably misconceived deflators is equally important. For instance, for deflating wages and salaries in the public administration, Consumer Price Index (General) was adopted in 2011-12 base year, deviating from the erstwhile practice of using Consumer Price Index (Industrial Workers). It is known that government employees are compensated for dearness, as per CPI(IW), regardless of sector in which they are working. In fact, in GVA from public administration, more than 80% comes from compensation of employees, which has grown more than 75% in real terms during 2011-2022. The real growth in this item may come largely from additional employment. But employment under government is perceived to have declined or remained stagnant at best. In any case, even after accounting for increases due to the Seventh Pay Commission, as well as higher longevity or minor additions in government employment, the increase is too high. This also needs to be better explained. Reliability In order to regain confidence in India's economic growth, it is necessary that its statistical system is transparent and reliable. MoSPI therefore needs to share the lessons learned in adopting alternative methods and datasets used in the 2011-12 base change. It must elucidate on the steps proposed to avoid similar pitfalls this time. Now that several states have also announced ambitious targets of trillion-dollar state economies, there is a fear that bureaucratic machinery may be asked to manufacture data whose reliability is questionable. It is admirable that in the last one year, MoSPI has initiated interactions with user bodies. It is nevertheless germane that no confidence building measure would be as effective as sharing the exact and detailed methodology as well as the attendant micro-data. But in a worrying development, MoSPI's draft dissemination policy of data, circulated in January 2025, envisages that access to microdata will be subject to the ministry's satisfaction while so far, approval of the ministry was not required and the data was made accessible on a simple request. Indian economy has witnessed several significant changes since 2011-12. These include enormous success with digital services, gig work, quick delivery of household goods, online shopping and new consumption patterns. We hope that the new series will suitably incorporate these developments. Sanjay Kumar and N.K. Sharma retired as Additional Director General and Director General respectively from the National Statistics Organisation.
Economic Times
14-06-2025
- Business
- Economic Times
India's soft industrial momentum, widening trade gap & business caution, key risks in H2 2025: Report
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel New Delhi: India 's soft industrial momentum, a widening trade gap , and early signs of business caution warrant close tracking as H2 2025 unfolds, according to a report by LLama the broader economic outlook remains positive, the report added that there are signs that some areas of the economy may need close attention going report said "India continues to run a "Goldilocks" macro script -- strong growth and moderating inflation -- with solid buffers in place. However, soft industrial momentum, a widening trade gap, and early signs of business caution warrant close tracking as H2 2025 unfolds".India is currently in a high-growth, low-inflation sweet spot. The growth is being led largely by the services sector, which continues to show strong momentum. However, industrial output is showing signs of weakness and needs to be watched carefully in the coming report noted that economic growth is accelerating. India's GDP rose to 7.4 per cent in the first quarter of 2025, up from 6.2 per cent in the last quarter of 2024. Gross Value Added (GVA) also improved to 6.8 per cent, reflecting resilience in domestic economic activity indicators remain strong. The Manufacturing Purchasing Managers' Index (PMI) stood around 58, while the Services PMI was in the 59-61 range, pointing to steady demand in both signs of industrial slowdown are emerging. The Index of Industrial Production (IIP) has slowed to 2.7 per cent, due to weakness in mining, manufacturing, and electricity the inflation front, there is positive news. Consumer Price Index (CPI) inflation fell sharply to 2.8 per cent in May 2025, from 5.2 per cent in December 2024, mainly due to a decline in food prices. Core inflation remains stable around 4 per cent, and the Wholesale Price Index (WPI) at 0.85 per cent suggests more price stability the positive growth and inflation trends, the report cautioned that several risks need monitoring. These include a widening trade deficit that could put pressure on the Indian rupee if capital inflows slow, persistent core inflation, global commodity price swings, and weak growth in core addition, business sentiment is showing early signs of caution, and flat labour force participation remains a long-term structural report concluded that while India's macroeconomic situation appears robust, close tracking of key indicators will be crucial as the second half of 2025 progresses.
Belfast Telegraph
05-06-2025
- Business
- Belfast Telegraph
Wholesale and retail giant Musgrave spent £1.2bn in NI economy last year
Musgrave NI, which owns the Centra, Mace and SuperValu names, has published a report on its economic contribution prepared by economists at Grant Thornton on the company's behalf. The report said the company supports 5,000 jobs while working with 250 NI suppliers, and 'investing significantly in local communities'. The report said it had spent a total of £1.2bn across the NI economy in 2024, adding £329m in Gross Value Added (GVA) and paying £121.5m in wages, representing 3.7% of sector employment. The report also said Musgrave, which has operated here since 1983, has invested £240m in NI supply chain partnerships and worked indirectly with over 3,000 farmers. Grant Thornton calculated that Musgrave's total spend with NI suppliers amounted to a further £256m in indirect expenditure. Last year, the company launched new brand, Good Food Locally Sourced, in a £14m investment in partnerships with local suppliers. It also made capital investments of £16m in new and refurbished stores and energy-saving upgrades. Across the SuperValu, Centra and Mace brands, Musgrave operates over 220 stores across Northern Ireland and plans to grow the network in 2025 and beyond. Trevor Magill, Musgrave NI managing director, said: 'Right across the board, we have deepened our investment in Northern Ireland over the past year through new store openings and refurbishments, environmental initiatives, local sourcing partnerships, and impactful charity contributions. 'To see this all accumulate into a figure of £1.2bn in economic output makes me incredibly proud of our team and the efforts that are made.' Andrew Webb, chief economist at Grant Thornton said: 'To be responsible for injecting £1.2bn of spending into the economy in one year is an incredible feat and something that doesn't happen without momentous effort.' Musgrave NI's wholesale division includes Musgrave Marketplace, Drinks Inc., La Rousse Foods and recently acquired businesses Robb Wines, Parkview Provisions and AFT.
Hindustan Times
30-05-2025
- Business
- Hindustan Times
India economy grew 6.5% in FY25, beating forecasts
The Indian economy grew 6.5% in fiscal year 2024-25 and 7.4% in the quarter ending March, according to data released by the National Statistical Office (NSO) on Friday that underlines the nation's position as the fastest growing economy in the world. In current dollar terms, India's gross domestic product (GDP) is now $3.9 trillion compared to $3.6 trillion in 2023-24, according to an estimate by research agency Crisil after the data was released. According to the International Monetary Fund, India is on pace to become the fourth largest economy in the world with GDP of $4.3 trillion in 2025-26. Pointing out that India is the fastest growing economy for the fourth year in a row, finance minister Nirmala Sitharaman said that all the engines of growth– manufacturing, services and agriculture-- have propelled the Indian economy in the January-March quarter and indicated that the prospects of a good monsoo would maintain the momentum in the current fiscal year. 'India is sustaining this growth as the fastest growing economy now for the fourth year continuously without a break, thanks to the work of our small, medium and large industries, which are coming in and making sure our manufacturing capacity, our service capacity, are all intact. And agriculture has also sustained us,' she said at an awards function in the Capital . The data shows that the Indian economy has lost momentum compared to fiscal year 2023-24 when the GDP growth was 9.2%. To be sure, that growth was largely a reflection of pent-up demand after the Covid pandemic, a fact also highlighted by Sitharaman in her speech. But private investment, required to sustain growth beyond 7%, continues to remain sluggish. Growth for the fiscal and the quarter was higher than most analysts' estimates. A Bloomberg poll of economists had expected annual GDP growth of 6.3% and 6.8% for the quarter. The primary reason for the divergence between analyst estimates and the actual numbers is the wide gap between GDP (7.4%) and Gross Value Added (6.8%) growth in the March quarter. GDP is the sum of GVA and indirect taxes minus subsidies. Sajjid Chinoy, Chief India Economist at J.P. Morgan, who had projected a 6.5% and 7.5% growth number for the fiscal year and the March quarter, that were closer to the actual numbers, had expected this variance due to a fall in subsidies. 'But, as with several GDP prints in recent years, the (GDP versus GVA) outturn will need careful interpretation, because it will be driven substantially by a sharp fall in subsidy payouts in the last quarter, compared to the previous year', Chinoy had written in a GDP preview research note released on May 28. To be sure, the March quarter GDP numbers are not surprising when seen in the context that even the second advance estimate of GDP released by the NSO in February had assumed a growth rate of 7.6% in the March quarter while projecting a 6.5% annual growth rate. While fiscal consolidation has played a role in the large gap between GDP and GVA growth in the March quarter, its impact was less than in 2023-24. India's fiscal deficit fell sharply from 5.6% in 2023-24 to 4.8% in 2024-25, according to the provisional data released on Friday. But it is expected fall only 40 basis points to 4.4% in 2025-26. With the larger economic situation largely unchanged between the second advance estimates released in February 2025 and provisional data released on Friday, what are the key takeaways from the disaggregated GDP data? Private consumption seems to have regained its primacy as the growth driver while capital formation and government spending seem to be losing steam. The latter is to be expected as government capex growth has already peaked and fiscal consolidation is weighing on government's revenue expenditure. Government Final Consumption Expenditure and Gross Fixed Capital Formation lost momentum growing at 2.3% and 7.1% in 2024-25 compared to 8.1% and 8.8% in 2023-24. Private Final Consumption Expenditure grew at 7.2% in 2024-25 compared to 5.6% in 2023-24. 'Consumption growth outpaced GDP, primarily driven by robust rural demand supported by a strong agricultural sector…We anticipate that consumption will remain robust in the current fiscal year, buoyed by favourable domestic factors such as normal monsoon patterns, the transmission of interest rate cuts by the Reserve Bank of India (RBI), and middle-class income tax benefits', Dharmakirti Joshi, Chief Economist, Crisil, said in a note. At the sectoral level, the growth slowdown was broad based in every sector except in agriculture which grew at 4.6% in 2024-25 compared to 2.7% in 2023-24. The slowdown was the sharpest in manufacturing, where the growth rate fell from 12.3% in 2023-24 to just 4.5%. It is important to underline that part of the slowdown in manufacturing is driven by indexation (accounting for inflation) issues. This is borne out from the fact that nominal growth in manufacturing in 2023-24 (10.9%) was lower than real growth (minus inflation) and it has gone back to being higher than real growth (6.3%) in 2024-25. Services, which account for more than half of GVA grew at 7.2% in 2024-25 compared to 9% in 2023-24. Its private components, namely, Trade, Hotels, Transport, Communication & Services related to Broadcasting, and Financial, Real Estate & Professional Services lost momentum. Public Administration, Defence & Other Services saw a small uptick in growth. RBI's Monetary Policy Committee (MPC) has projected a GDP growth of 6.5% for 2025-26 in April, which was a 20-basis point downgrade from the projection made in February 2025 on account of increased downside risks from the global economy. 'Government retains its outlook on FY26 growth at 6.3-6.8%, with private consumption, especially the rural rebound, and resilient services exports as the key drivers,' Chief Economic Advisor V Anantha Nageswaran said while reacting to the GDP numbers. 'Multiple agencies project India's growth to be in the range of 6.3 – 6.7 per cent in FY26. Amidst global uncertainty, global growth for 2025 and 2026 is likely to slow,' he added.
