New GDP Series Uses Double Deflation in 28 of 30 Manufacturing Categories
The new GDP series double deflation method has been used in 28 of the 30 manufacturing categories, according to the Ministry of Statistics and Programme Implementation’s latest Sources and Methods document. The remaining two categories still use single extrapolation because of difficulties linked to imported inputs.
The methodology is part of India’s GDP series with 2022-23 as the base year. The revised approach separately adjusts the value of manufacturing output and the cost of intermediate inputs for price changes before calculating real Gross Value Added.
Under the new GDP series double deflation method, the two categories not yet covered are the production and processing of meat, fish, fruit, vegetables, oils and fats, and the manufacture of pharmaceutical and medicinal products. MoSPI said both have a high share of imported inputs, making it difficult to match input items with detailed output Producer Price Index data.
Double deflation matters because input and output prices do not always move at the same pace. Using separate price adjustments can therefore provide a more detailed measure of how much value manufacturing actually creates. MoSPI describes the approach as a move toward more granular measurement of real growth.
The India GDP methodology has also incorporated more detailed price indices and newer data sources. MoSPI says the revised framework uses granular price information and draws on sources such as GST data, the Public Finance Management System and e-Vahan to strengthen national accounts estimates.
The new GDP series double deflation method is a major change from the earlier approach, under which double deflation was mainly used for agriculture and mining while other sectors relied on broader price adjustments. The new series has moved away from single deflation and introduced more detailed sector-level calculations.
The revised series has also changed household-sector estimates. Household savings through gold and silver ornaments were estimated at Rs 1.65 lakh crore in 2022-23, more than twice the previous estimate reported for the category.
MoSPI is still working to extend double deflation to the two remaining manufacturing categories. The ministry has also said that further updates to price indices, including the Producer Price Index, will be incorporated as they become available.
The India GDP methodology is expected to continue evolving as additional data sources and revised statistical inputs become available, while the 2022-23 base year remains in place.