GDP, GVA and the deflator: how to read an Indian quarterly growth release without getting it wrong
Three numbers in every quarterly release describe the same three months. They are not interchangeable, and the most quoted one is the least direct.
By Divya Raghavan · Markets Reporter, Business
The short version
- Real GDP and real GVA are not the same series; GVA is the output measure, and the two differ because of product taxes.
- The gap between nominal and real growth is the deflator, and it is not a quality adjustment.
- The April-June release reported 7.8% real GDP, 8.2% real GVA and 10.3% nominal growth.
Almost every argument about an Indian quarterly growth figure is an argument about which of three numbers is being quoted. The August 31 release is a clean example: 7.8% for real GDP, 8.2% for real gross value added and 10.3% for nominal GDP. All three are correct. They are not the same measurement.
GDP and GVA are not interchangeable
Gross value added measures output by sector: agriculture, industry, services, and the taxes that sit between production and the market. GDP adds the product taxes net of subsidies and deducts nothing at this step. When GST is raised, GDP can rise without any change in what a factory produced.
That is why the two rates moved differently in this quarter. Real GDP at 7.8% sat below real GVA at 8.2%, a gap consistent with net product taxes taking a larger share of the value chain than a year earlier. It is a small number this time. In a quarter with a large tax change, it is not.
Nominal is not a better number
Nominal GDP of ₹88.27 lakh crore, up 10.3%, counts output at the prices actually charged in the quarter. Real GDP counts it at 2022-23 prices. The ratio between the two growth rates is the deflator, and it measures the price level, not the quality of what was produced.
- Real GDP measures volume at 2022-23 prices and is the headline growth rate.
- Real GVA measures sector output before net product taxes.
- Nominal GDP measures current-price value and is the series the budget and the markets trade off.
Why the base year keeps coming up
Every real series is measured against a fixed base year, and India's has been moved to 2022-23. That choice changes the implied growth rate without changing any actual output, because the weights attached to each sector change with the base. It is a measurement decision with visible political consequences, and it is the subject of a separate explainer in this issue.
- Sector growth rates — the composition tells you what produced the headline.
- The deflator — it tells you how much of nominal growth is price.
- Revisions — quarterly estimates are provisional, as the 8.6% print for the prior quarter shows.
Sources — 3 references
These are the published sources this article was established against. NOT SCRIPTED wrote the text above; the sources below are credited to their own publishers.
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Divya Raghavan
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