"New GDP Series Raises Questions on Manufacturing Data Reliability"
GVA Deflator
price index used to convert nominal GVA into real GVA at constant prices.
Index of Industrial Production (IIP)
monthly volume index of formal industrial output, excluding informal sector.
India's national income accounting is managed by the National Statistical Office (NSO) under MoSPI. The current series uses 2011-12 as the base year, adopted in 2015 when India shifted from the 2004-05 base and moved from measuring output at factor cost to market prices. This aligned India with the UN System of National Accounts (SNA) standards. The core formula is: GDP at market prices = GVA at basic prices + taxes on products − subsidies on products.
Measuring manufacturing GVA has historically been difficult. The sector spans a large informal segment, diverse product categories, and complex supply chains. The Index of Industrial Production (IIP), published monthly by MoSPI, serves as a high-frequency proxy for manufacturing output. Before the 2011-12 base revision, IIP and manufacturing GVA moved closely together, with a correlation of approximately 0.8. After the revision, this correlation weakened. The new GDP series, announced recently with a revised methodology, was expected to resolve these longstanding measurement problems. MoSPI has not yet released the detailed technical documentation explaining the new calculations.
The government has pursued an ambitious manufacturing agenda. The Make in India programme, launched in 2014, aimed to raise manufacturing's share of GDP. The Production-Linked Incentive (PLI) scheme, introduced later, offered output-linked financial incentives across 14 sectors. Both initiatives were partly motivated by the China-plus-one strategy, the global trend of companies diversifying supply chains away from China, and by the need to compete with aggressive Chinese export pricing.
Gross Value Added (GVA) measures the value of output minus the value of intermediate inputs consumed in production. Real GVA is calculated at constant prices, stripping out the effect of price changes. The GVA deflator is the price index used to convert nominal GVA into real GVA. If the deflator is negative, it implies falling price levels in that sector, a condition called deflation.
The IIP measures the volume of industrial output. It covers the formal manufacturing sector and excludes the informal economy. Real GVA, by contrast, includes both formal and informal manufacturing. In principle, real GVA can grow faster than IIP if: (a) the informal sector grows faster than the formal sector, or (b) productivity improves, meaning firms produce more value added per unit of intermediate input. …
With reference to Indian economy, consider the following statements:
1.The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2.The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
Increase in absolute and per capita real GNP do not connote a higher level of economic development, if
Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.
'Economic growth in the recent past has been led by increase in labour productivity.' Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.
With reference to the measurement of manufacturing sector performance in India, consider the following statements:
1.Real GVA is calculated at constant prices, so a negative GVA deflator will inflate the real GVA figure.
2.The Index of Industrial Production (IIP) covers both formal and informal manufacturing sectors.
3.Real GVA can legitimately grow faster than IIP only if informal sector output grows faster than formal sector output, or if productivity improves.
Which of the statements given above is/are correct?
Which of the following best explains why using formal sector data as a proxy for informal sector performance in manufacturing GVA estimation is problematic?
With reference to India's GDP estimation framework, which of the following statements is/are correct?
1.The current GDP series uses 2011-12 as the base year and measures output at market prices rather than factor cost.
2.The First Advance Estimate, released in January, is the most reliable of the four successive GDP estimates.
3.GDP at market prices equals GVA at basic prices plus taxes on products minus subsidies on products.
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