Early this year, the National Statistical Office (NSO) released the new series of the National Accounts Statistics (NAS). It shows that the manufacturing sector’s gross value added (GVA) is ₹38.6 lakh crore (₹38.6 trillion), constituting 14.7 per cent of GDP (gross domestic product) for the year 2023-24 at current prices. How reliable is the official estimate? This article investigates.

The manufacturing sector has two parts: One comprises all registered factories employing 10+/20+ workers with/without power, including registered companies (defined as the organised/formal sector). The other comprises unincorporated/ informal/ household units consisting of small factories/workshops falling outside the corporate/factory sector. The Annual Survey of Industries (ASI) reports the production accounts of the factory sector, while the Annual Survey of Unincorporated Sector Enterprises (ASUSE) covers the informal sector. The combined output (GVA) of the factory and unincorporated sectors almost completely represents total manufacturing output.

The discrepancy in estimates

For 2023-24, the sum of the GVA of units covered by the ASI and ASUSE is ₹27.4 lakh crore (the Alternative Estimate or, AE). The official figure, as per the NAS, is ₹38.6 lakh crore. It is higher than the AE by a whopping 40.9 per cent. Let’s call this the GAP. What could account for it?

While minor variations between the two estimates is understandable due to methodological or definitional issues, such a substantial GAP between the two estimates using official data sources surely raises many questions.

What are the data sources used for estimating the official GVA? For the unincorporated sector, it is ASUSE – the same as what we have used to estimate the AE. Hence, it cannot account for the GAP noted above. Moreover, the unincorporated sector’s share in total manufacturing GVA is a mere 13.9 per cent.

Hence, the reason for the GAP must lie in the estimation of organised manufacturing output. The NAS uses company balance-sheet data sourced from the Ministry of Corporate Affairs’ database (MCA-21), compiled using the annual statutory filings by registered companies. This practice of using the MCA data began with the previous NAS revision (base year 2011-12), partially replacing the ASI. The procedure has continued in the latest revision, with minor modifications.

A standard way to validate the GVA is to use employment data to estimate the sector’s potential output by applying appropriate “technical ratios” drawn from the ASI and ASUSE datasets. The official Periodic Labour Force Survey (PLFS) for 2023-24, estimated that the manufacturing sector employed 697.5 lakh workers.

However, as per the ASI and ASUSE datasets, only 532.9 lakh workers were employed to produce the official GVA. Thus, quite possibly, the contribution of the remaining 164.6 lakh “residual workers” — 697.5 minus 532.9 — may account for the GAP in the GVA reported above.

The definitions of employment in the three surveys are not the same, and their data collection methods differ. However, for a validation exercise, the PLFS estimates provide a useful reference point. Official agencies also use similar methods.

Some of this GAP is contributed by the residual 2,72,534 MCA companies, not covered in the 78,618 “private companies” captured in the ASI data. A majority of the residual companies are likely to be to non-factory private companies. The left over residual workers are likely to belong to the unincorporated sector not covered in ASUSE survey because of their small size.

Then, applying the “technical ratios” of the appropriate segments of manufacturing as derived from unit-wise ASI and ASUSE data, the potential GVA of the residual workers is estimated to be ₹3.6 lakh crore.

Then adding the potential GVA to the AE of ₹27.4 lakh crore reported earlier, the likely/potential overall manufacturing GVA could be ₹31.0 lakh crore.

This figure, however, still falls short of the official GVA estimate (of ₹38.6 lakh crore) by 24.5 per cent. In other words, the potential GVA of all workers employed in the manufacturing sector in companies and unincorporated sector enterprises would at best account for 80.3 per cent of the official estimate. It still leaves ₹7.6 lakh crore (or 19.7%) worth of NAS manufacturing GVA “unaccounted” for or “unexplained” (Figure 1). This is the real puzzle of the new GDP figures for the manufacturing sector.

How can this GAP be reconciled with the best alternative estimate obtained using widely used data sources? The NSO documents say that, being an establishment-based survey, the ASI reportedly fails to capture value addition taking place within an enterprise, but outside of the factory premises (such as head office, marketing and distribution, or R&D activities). Is this really true? Probably not. Available evidence does not seem to support the official view (Dholakia, Nagaraj and Pandya, Economic and Political Weekly, 2018).

Alternatively, if the ASI-based GVA estimate did not underestimate production, how could such a large GAP arise. Is it because of the NSO methodology of scaling up of sample estimates of active companies for the universe of companies whose size and composition are hazy and unverified?

The statistical issue

As per the latest NAS, for 2023-24, manufacturing GVA is ₹38.6 lakh crore at current prices. An alternative estimate, using time-tested official ASI and ASUSE data sets, finds the official figure to be higher than the alternative estimate by 40.9 per cent.

Even after accounting for the contribution of residual companies and workers, the unexplained GAP remains at 24.5 per cent. Whether the official estimate represents a “fuller description of ground reality” through the use of corporate data, or amounts to an overestimation of output, remains a matter of contention. The statistical issue can only be resolved if the MCA data and NSO’s methodologies are made public for independent verification.

(Jatinder S. Bedi is a Professor of Economics at the Institute for Development and Communication, Chandigarh. R. Nagaraj was formerly with the Indira Gandhi Institute of Development Research (IGIDR), Mumbai)

Published – September 04, 2026 07:30 am IST

Reserve Bank of India (RBI) Governor Shaktikanta Das speaks at the Global Fintech Fest (GFF) 2024, in Mumbai on Friday.
| Photo Credit: ANI

The slowing of India’s economic growth to a 15-month low of 6.7% in the April-June quarter was due to “lower” government spending in the wake of the enforcement of the model code of conduct for the recent Lok Sabha polls, RBI Governor Shaktikanta Das said here on Saturday (August 31, 2024).

The RBI had projected a growth rate of 7.1% for the April-June quarter of this fiscal.

“The Reserve Bank projected a growth rate of 7.1% for the first quarter. However, the first advance estimation data released by the National Statistical Office showed the growth rate at 6.7%,” Mr. Das told reporters here.

The components and main drivers responsible for the GDP growth like consumption, investment, manufacturing, services and construction have registered a growth of more than 7%, he said.

Only two aspects have pulled the growth rate slightly down. Those are—government (both central and state) expenditure and agriculture, the RBI Governor pointed out.

He said the government expenditure was low during the first quarter perhaps due to elections (April to June) and operation of model code of conduct by the Election Commission.

“We would expect the government expenditure to pick up in coming quarters and provide the required support to growth,” Mr. Das said.

Similarly, the agriculture sector has recorded a minimal growth rate of around 2% in the April to June quarter. However, the monsoon was very good and spread all over India except a few areas. So, everyone is optimistic and positive about the agriculture sector, he noted.

“Under these circumstances, we have reasonably confident expectations that the annual growth rate of 7.2% projected by the RBI will be materialized in coming quarters,” the Governor asserted.

Government final consumption expenditure tanked 0.2% in Q1, while public capital expenditure spends that include projects financed by the Centre, States and central public sector firms, were 33.3% lower than a year ago. 
| Photo Credit: Getty Images/iStockphoto

Signalling a moderation in the economy’s growth momentum, India’s real GDP rose 6.7% in the April to June 2024 quarter, the slowest in five quarters, and well below the Reserve Bank of India’s expectation of a 7.1% uptick as well as the 7.8% uptick registered in the preceding quarter.

For the first time in a year, growth in the real Gross Value Added (GVA) in the economy outperformed GDP growth, with a 6.8% uptick in the first quarter (Q1) of 2024-25. This is a significant shift from the preceding two quarters, Q3 and Q4 of 2023-24, when real GVA growth lagged GDP growth by 1.8 and 1.5 percentage points, respectively.

The central bank has penned in a GDP growth of 7.2% for this year, and the softer than expected Q1 growth amid easing headline inflation may shift the dynamics for its hawkish monetary policy stance, especially with the U.S. Federal Reserve indicating an interest rate cut next month.

Chief Economic Advisor V. Anantha Nageswaran sought to play down the Q1 blip as “a slight slowdown that was anticipated by most commentators” as the conduct of the general elections had brought down government expenditure, including capital spends.

“So in that sense, the 6.7% [growth] was well within the consensus anticipation. At the same time, there is a better alignment between the demand and supply side of the economy, and many components of the demand side, such as final private final consumption expenditure, gross fixed capital formation and net exports have held up quite well,” he said. The 2% rise in farm sector GVA in Q1 indicates a turnaround from recent quarters’ lows, such as the 0.6% rise in January-March 2024, he noted.

Government final consumption expenditure tanked 0.2% in Q1, while public capital expenditure spends that include projects financed by the Centre, States and central public sector firms, were 33.3% lower than a year ago. Still, gross fixed capital formation grew 7.5%, recovering from a four-quarter low of 6.5% in the previous quarter, and private consumption outgoes seemed to rebound from last year’s weak trends to hit a six-quarter high of 7.4%.

“The major components apart from public sector for capex are households and the private sector. A stagnation in the public sector capex along with a steady capex by the household sector indicates a modest pickup in the private sector capex,” said Paras Jasrai, senior economic analyst at India Ratings and Research.

“This GVA growth in Q1 has been driven by significant growth in the Secondary Sector (8.4%), comprising Construction (10.5%), Electricity, Gas, Water Supply & Other Utility Services (10.4%) and Manufacturing (7%) sectors,” the National Statistical Office said.

On the services side, however, growth in the job-intensive ‘Trade, Hotels, Transport, Communication & Services related to Broadcasting’ segment dropped to 5.7% from 9.7% in the same quarter last year, while ‘Financial, Real Estate and Professional Services’ eased to 7.1% from 12.6% a year ago. Economists attributed some of this to statistical base effects.

Arvind Virmani, NITI Ayog member. File
| Photo Credit: Special arrangement

“The Indian economy will grow around 7% in the current fiscal year and is on track to maintain a similar growth rate for several years,” NITI Aayog member Arvind Virmani said on July 12.

Mr. Virmani said there are new challenges facing the country and they will have to be dealt with. “Indian economy will grow at 7% plus minus point 0.5%… I expect that we are on track to grow at 7% for several years from today,” he told PTI in an interview.

Last month, the Reserve Bank of India (RBI) pegged the FY25 gross domestic product (GDP)growth rate at 7.2%. Responding to a question on the decline in private consumption expenditures in the last fiscal year, Mr. Virmani said it is actually recovering now.

“The effect of the pandemic was to draw down savings… and very different from previous financial shocks,” he said. Explaining further, Mr. Virmani said it is like what he calls a double drought situation.

“We also had, of course, El Nino last year, but what the pandemic did was that it resulted in people having to draw down their savings… So, the obvious reaction is to rebuild your savings, which tend to reduce current consumption,” he noted.

“If people were buying branded goods, they will buy less branded or ordinary goods and save part of that money,” he said, explaining that this shows a slide in consumption.

Mr. Virmani said history shows that coalition partners can slow privatisation in States in which the regional ally is in power, but that is not a big issue.

“I see no reason why privatisation cannot happen in the other States and it may also happen in these States (where coalition parties are in power). I am just giving you a historical example,” he said.

With support from N. Chandrababu Naidu’s Telugu Desam Party (TDP) and Nitish Kumar-led JD(U), along with other alliance partners, the NDA crossed the halfway mark in the recently held Lok Sabha elections to form the government at the Centre.

On the decline in foreign direct investments (FDI) to India, despite it being the fastest growing economy, Mr. Virmani said riskless return of investment is much higher in the U.S. and other developed countries than in emerging markets.

“As soon as interest rates begin to come down in the U.S., I expect the FDI into emerging markets, including India, to increase,” he said.

As per the latest All India Household Consumption Expenditure Survey, the average monthly per capita consumption expenditure in Indian households rose by 33.5% since 2011-12 in urban households to ₹3,510, with rural India’s MPCE seeing a 40.42% increase over the same period to hit ₹2,008. File
| Photo Credit: The Hindu

For the first time in about 11 years, the government on February 24 released the broad findings of the All India Household Consumption Expenditure Survey carried out between August 2022 and July 2023. The data will play a key role in reviewing critical economic indicators, including the Gross Domestic Product (GDP), poverty levels, and the Consumer Price Inflation (CPI).

The Household Consumption Expenditure Survey (HCES) is usually conducted by the National Statistical Office (NSO) every five years, but the findings of the last Survey, conducted in 2017-18 soon after the demonetisation of high-value currency notes and the implementation of the Goods and Services Tax (GST), were never released after the government cited “data quality” issues.

As per the latest Survey, the average monthly per capita consumption expenditure (MPCE) in Indian households rose by 33.5% since 2011-12 in urban households to ₹3,510, with rural India’s MPCE seeing a 40.42% increase over the same period to hit ₹2,008.

Importantly, the numbers show that the proportion of spending on food has dropped to 46.4% for rural households from 52.9% in 2011-12, while their urban peers spent just 39.2% of their overall monthly outgoes on food compared with 42.6% incurred 11 years earlier. This reduction could translate into a lower weightage for food prices in the country’s retail inflation calculations.

The MPCE numbers cited above do not take into account the imputed values of items received free of cost by individuals through various social welfare programmes such as the PM Garib Kalyan Ann Yojana (PMGKAY) or State-run schemes, which were calculated separately, while including a few non-food items received through such schemes, including computers, mobile phones, bicycles, and clothing.

The average MPCE, at 2011-12 prices, was a tad higher when these items were included while excluding free education and healthcare sops — at ₹2,054 for rural households, and ₹3,544 for urban homes.

The Statistics and Programme Implementation Ministry released a factsheet on the summary of the Survey findings, and said a detailed report on the survey will be brought out subsequently. The estimates of the MPCE are based on data collected from 2,61,746 households, of which 1,55,014 were in rural areas, spread over all States and Union Territories, the Ministry said.

“The bottom 5% of India’s rural population, ranked by MPCE, has an average MPCE of ₹1,373 while it is ₹2,001 for the same category of population in the urban areas. The top 5% of India’s rural and urban population, ranked by MPCE, has an average MPCE of ₹10,501 and ₹20,824, respectively,” according to the factsheet.

Among the States, the MPCE is the highest in Sikkim for both rural (₹7,731) and urban areas (₹12,105). It is the lowest in Chhattisgarh, where it was ₹2,466 for rural households and ₹4,483 for urban household members.

Economists feel a prolonged conflict in West Asia could push crude oil prices beyond India’s comfort zone.
| Photo Credit: Getty Images/iStockphoto

The story so far: The Indian economy, measured in terms of the Gross Domestic Product (GDP) as well as Gross Value-Added (GVA), grew 7.8% between April and June (first quarter or Q1) this year, a four quarter-high. The Finance Ministry believes the momentum of economic activity was carried forward in the July-September quarter, despite retail inflation hardening to 6.4% from 4.7% in Q1 thanks to a spike in food prices. Growth estimates for Q2 will come in next month, but the Reserve Bank of India (RBI) expects GDP growth to moderate to 6.5%. A week into the second half of the year, the Israel-Palestine conflict erupted and a spate of fresh dark clouds now hover over the economy.

How have experts reacted to recent events?

Economists feel a prolonged conflict in West Asia could push crude oil prices beyond India’s comfort zone and if other countries join the fray, critical sea routes could face disruptions and spike transport and insurance costs. The government may not pass on higher petroleum prices to consumers ahead of critical elections, but producers’ costs may still rise. Airlines, for instance, have been hiking fares in line with aviation turbine fuel costs. Moreover, higher fuel import bills could pose implications on the exchequer as oil marketing companies may need support for under-recoveries. Finance Minister Nirmala Sitharaman, in her first remarks since the strife in Gaza, said it has brought concerns about fuel, food security and supply chains back to the forefront. She flagged concerns about the impact of any disruptions on inflation in the near future. In subsequent comments, she has also emphasised the need to ensure that global food, fertilizer and fuel supplies did not become an “instrument of war and disruption”.

The RBI Governor Shaktikanta Das, who chaired a monetary policy review hours before Hamas launched the first salvo in the conflict, summed up the emerging situation eloquently. “We all thought that the period of uncertainties is over, but as you would have seen in the last fortnight, new uncertainties have been thrown up while some that already existed, like oil prices and volatility in financial markets, have got more pronounced,” he said last Friday. Among the new uncertainties, he listed the spurt in U.S. bond yields that hit a 16-year high this month and mixed global data points amid fears of “higher for longer” interest rates. A cut in India’s interest rate is not on the cards, he emphasised. “Interest rates will remain high… how long… only time and the way the world is evolving, will tell.” Higher interest rates can impact investment flows in markets like India.

Is there a shift in the assessment of risks for the economy?

The International Monetary Fund (IMF) raised its 2023-24 GDP growth estimate for India to 6.3% this month from 6.1% estimated earlier. This is just slightly below the 6.5% GDP uptick the Finance Ministry and the RBI have penned in for this year, following last year’s 7.2% growth. In its monthly economic review report released last month, the Department of Economic Affairs (DEA) in the Finance Ministry said it was comfortable with the 6.5% hopes “with symmetric risks”. Bright spots of corporate profitability, private sector capital formation, bank credit growth and construction sector activity offset the risks at the time. These included steadily climbing crude oil prices (“but no alarms yet”) and an overdue global stock market correction, which it termed “an ever-present risk”. The RBI, this month, also asserted that risks from the uneven monsoon, geopolitical tensions, global market volatility and economic slowdown, were “evenly balanced”. The RBI expects GDP growth to slow to 6% in the current quarter, and further to 5.7% in January to March 2024 before picking up to 6.6% in Q1 of 2024-25. Governor Das has since exuded confidence in the overall macro fundamentals of the Indian economy, despite the uncertainties that have emerged this month.

Last Monday, in its latest economy review, the DEA noted that though domestic fundamentals are strong and improving, downside risks arise from global headwinds that have been compounded by recent developments in the Persian Gulf, and uncertainties in weather conditions due to El Niño effects. “Depending on how the situation develops, crude oil prices may push higher. Further, the relentless supply of U.S. Treasuries and continued restrictive monetary policy in the U.S. (with further monetary policy tightening not ruled out) could cause financial conditions to be restrictive,” it said. It was also prescient about the U.S. stock markets having a greater correction risk, which would have spillover effects on other markets. India’s stock markets clocked six straight days of sharp declines before a marginal recovery was seen this Friday. The DEA has flagged a broader worry about fraught geopolitical conditions triggering a surge in risk aversion. “If these risks worsen and are sustained, they can affect economic activity in other countries, including India,” it noted, even as it averred that India’s growth story remained on track. Inflation had eased to 5% in September from a 15-month high of 7.4% in July and the department highlighted higher upticks in industrial capacity utilisation levels, private consumption and investment, retail loans extended for vehicles and housing as bright spots in its economic outlook. The report also cited ‘optimistic’ findings from RBI’s forwarding-looking surveys on manufacturing, consumer confidence, employment and inflation expectations to stress all is well.

What are domestic factors to watch out for?

Inflation may have subsided last month, but could creep back up. The RBI, which expects average inflation of 5.4% through 2023-24, has penned in a 5.6% average uptick in prices for the October to December quarter and 5.2% for the first six months of 2024. While some vegetable prices have corrected, inflation in onions has shot up while for pulses and some cereals, prices are likely to stay high for a while. The IMF and World Bank expect inflation to average even higher at 5.5% and 5.9%, respectively. The RBI’s preferred 4% inflation mark remains elusive as do prospects of interest rate cuts. This doesn’t bode well for a sustained rise in consumption demand that is vital to revive private investments. A Bank of Baroda study on consumption trends shows that production of readymade garments, mobile phones, hair dye, shampoo, cookers and even ice cream, had declined between 12% to 20% in the first five months of this year. “Normally when inflation is high households tend to cut back on discretionary spending which is what is being seen today,” it noted. With pent-up demand effects fading, the next couple of months will determine whether consumption has actually picked up, the Bank’s economists said. Rural demand which has been lagging, will be important, and may come under more pressure if some crops’ output is affected. Last but not the least, an economist from a rating firm said, the upcoming election season could imply some slowdown in public capex in infrastructure that revved up the economy in recent quarters.

T.V. Somanathan, Finance Secretary. File.
| Photo Credit: KAMAL NARANG

The government is expected to constitute the 16th Finance Commission by end of November, Finance Secretary T V Somanathan said.

Finance Commission is a constitutional body that gives suggestions on Centre-State financial relations.

It suggests, among other things, the ratio in which tax is to be divided between the Centre and States for five years, beginning April 1, 2026.

“The Finance Commission is expected to be constituted by end of November because that’s the statutory requirement,” he told PTI in an interview.

Terms of Reference (ToR) for the Commission is being finalised, he said.

The previous Finance Commission submitted its report on November 9, 2020, for the 5 fiscals — 2021-22 to 2025-26 — to the President.

The 15th Commission under N.K. Singh had kept the tax devolution ratio at 42% — at the same level suggested by the 14th Commission.

The Central government accepted the report of the commission, and accordingly, the States are being given 42% of the divisible tax pool of the Centre during the period 2021-22 to 2025-26.

The 15th finance commission’s recommendations include the fiscal deficit, debt path for the Union and States, and additional borrowing room to states based on performance in power sector reforms.

As per the glide path for fiscal consolidation, the government aims to bring down the fiscal deficit to 4.5% of gross domestic product (GDP) by the 2025-26 fiscal.

For the current fiscal, the deficit is projected at 5.9% of GDP, lower than 6.4% in the last fiscal ended March 31, 2023.

He also said the government will stick to the fiscal deficit target of 5.9% of the GDP as robust tax, non-tax collections will help meet the spending requirement and make up for any shortfall in disinvestment proceeds.

Although there would be a shortfall with respect to disinvestment, he said, this shortfall would be met by non-tax revenue mobilisation.

“Disinvestment target is unlikely to be met. However, I would say in aggregate the collective amount between disinvestment and non-tax revenue is likely to be very close to the budget,” he said.

The total of disinvestment receipts, plus non-tax receipts are likely to be very close to the Budget Estimates, he said.

“We expect to adhere to our fiscal deficit target this year…none of the events so far have caused anything for us to deviate from it,” he said.

The government has already got a higher dividend from the Reserve Bank of India and expects higher dividends from public sector banks and other PSUs than estimated in the Budget.

The Reserve Bank of India in May approved a ₹87,416-crore dividend payout to the central government for 2022-23, nearly triple of what it paid in the preceding year. The government was expecting ₹48,000 crore from the RBI, public sector banks and financial institutions in the current fiscal.

The dividend payout by the RBI was ₹30,307 crore for the accounting year 2021-22. With public sector banks posting record profits of over ₹1 lakh crore in fiscal 2022-23, the government’s earnings from them are likely to be higher.