CEA Nageswaran says monthly data suggests FY23 GDP may be revised upwards

Chief Economic Adviser V Anantha Nageswaran

India's high-frequency data suggests this year's GDP numbers may be revised upwards down the line, Chief Economic Adviser V Anantha Nageswaran said on March 2.

"Given the high-frequency indicators and the pace they are recovering, I believe current year data when revised next year would go upward rather than downward," Nageswaran said, pointing to indicators such as the manufacturing Purchasing Managers' Index and vehicle sales, among others.

Nageswaran was speaking to reporters after the statistics ministry said on February 28 that the Indian economy expanded by 4.4 percent in October-December, down from 6.3 percent in July-September.

Also read: India's economic growth slows down further to 4.4% in Dec quarter

The 6.3 percent growth figure itself was less than half the 13.2 percent increase posted in April-June 2022 as the GDP growth rate benefitted from a low base in the early part of the year.

"It is not that the recovery is becoming weaker. Recovery will stabilise at some point because the base has become bigger and you will come to a steady growth rate in which medium-term factors will become important," the government's top economist said.

Also read: FY23 GDP estimate: What's hot and what's not?

The data released on February 28 also provided the second advance estimate for the full year's growth rate, which was retained at 7 percent. However, previous years' data saw some noteworthy revisions, which Nageswaran said adds noise to the data and makes any interpretation difficult. For instance, the GDP growth rates for 2019-20, 2020-21, and 2021-22 have been revised upwards to 3.9 percent, -5.8 percent, and 9.1 percent from 3.7 percent, -6.6 percent, and 8.7 percent, respectively.

"The data in India is not quarterly, seasonally adjusted. We need to look at three years' data from 2019-20 to 2022-23 for better comparison," Nageswaran said.

The fall in the private final consumption expenditure growth to 2.1 percent from 8.8 percent in July-September has left economists worried. A contraction in the manufacturing sector's gross value added by 1.1 percent following a larger contraction in the previous quarter is also a concern.

However, Nageswaran argued there is still pent-up demand in the system.

"We have been growing below potential in the last few years. The medium-term potential is between 6.5-7 percent as we have two important tail-winds in our favour - financial sector balance sheet, which is well prepared, and the digital public infrastructure," he added.