Some economists have expressed skepticism regarding India’s third-quarter GDP data, which indicated a faster-than-expected growth rate of 8.4 percent.
As per a report by news agency Reuters, economists have drawn attention to the discrepancy between the GDP and Gross Value Added (GVA) figures in Q3FY24.
It is worth noting that alongside GDP, the government also releases GVA data, which serves as a metric for gauging the total value of goods and services generated within the economy.
GVA is frequently utilized to evaluate the individual contributions of various sectors or industries to the economy. Moreover, it is considered a more accurate measure of economic expansion since GDP computation encompasses indirect taxes while excluding government subsidies.
In the third quarter of FY24, GVA expanded by 6.5 percent, contrasting with the 8.4 percent GDP growth.
Samiran Chakraborty, an economist at Citi, cautioned in a note on Thursday that the GDP figure above 8 percent “should be interpreted with caution” due to the significant disparity with GVA, alongside a downturn in agricultural activity and a two-tiered economic growth pattern.
Many economists pointed out that the gap between GDP and GVA could be attributed to the surge in tax collections and a reduction in government subsidies during the quarter.
Neelkanth Mishra, the chief economist at Axis Bank, highlighted that the divergence is currently at its highest level in a decade.
“We anticipate that similar substantial divergences will not emerge in 2024-25,” Mishra remarked.
Economists also observed that third-quarter growth was driven by increased investment, while consumption trailed behind.
They indicated that investment-led growth, fueled by government expenditure and the residential real estate sector, expanded by 10.6 percent year-on-year in Q3FY24. However, consumption registered a mere 3.5 percent increase, falling short of broader economic growth.
Yuvika Singhal, an economist at Quantico Research, informed Reuters that although a rise in private consumption was anticipated during the festive season, the extent of the uptick was “disappointingly low”.
