The Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday issued additional information to explain various aspects of the GDP estimates for the first quarter of 2026-27, including the use of double deflation, differences between GDP and other inflation measures, revisions to the previous year’s estimates and the gap between nominal and real Gross Value Added (GVA).
The explanation comes after the Ministry released the updated annual and quarterly GDP series. The revised series incorporates the new Output Producer Price Index (PPI), Banking Services Price Index (BkSPI), both with base year 2022-23, along with updated data from various administrative sources.
The Ministry said the additional information was aimed at providing greater clarity on the methodology and interpretation of the latest GDP estimates. It covers the adoption of double deflation and consequent negative implicit deflators, differences between GDP deflators and indices such as CPI and WPI, the gap between nominal and real GVA/GDP, discrepancies between production and expenditure-side GDP estimates, and comparisons between the new and old series.
Why manufacturing can have a negative GVA deflator
Addressing questions over the -1.5 per cent implicit GVA deflator for manufacturing in Q1 2026-27, the Ministry said a negative deflator does not mean that manufacturing prices have fallen.
Under the double-deflation approach, output and intermediate consumption in the manufacturing sector are deflated separately, with real GVA calculated as real output minus real intermediate consumption.
The Ministry explained that when input prices rise faster than output prices, nominal GVA can grow more slowly than real GVA. This can result in a negative implicit GVA deflator even when both output and input prices are increasing.
In Q1 2026-27, manufacturing nominal GVA grew by 7.7 per cent, while real GVA increased by 9.2 per cent, resulting in a negative implicit GVA deflator of 1.5 per cent.
The Ministry said activities such as textiles and cotton ginning, basic metals, and rubber and plastic products recorded instances where input price growth exceeded output price growth.
It stressed that the negative deflator should therefore not be interpreted as evidence of declining manufacturing output prices, but as a reflection of the relative movement of output and input prices under the double-deflation framework.
In contrast, agriculture GVA recorded a positive implicit inflation rate of 3.9 per cent in Q1 2026-27. The Ministry said the output PPI for agriculture, forestry and fishing rose by around 5 per cent during the quarter, contributing to the positive movement in nominal agricultural GVA.
The Ministry also rejected the contention that the previous year’s current-price GDP was revised down from around ₹86 lakh crore to ₹80 lakh crore to make the current year’s growth rate appear higher.
It explained that the Q1 2025-26 GDP estimate was initially released on August 29, 2025, under the then-prevailing 2011-12 base-year series, at ₹86.05 lakh crore at current prices.
Following the introduction of the new GDP series with 2022-23 as the base year in February 2026, the estimate was revised to ₹80.32 lakh crore. It was subsequently updated to ₹80.44 lakh crore at the time of the provisional GDP estimates for 2025-26 released on June 5, 2026.
After the new IIP and PPI data became available and were incorporated into the GDP compilation, the Q1 2025-26 current-price GDP estimate was revised further to ₹80.00 lakh crore.
The Ministry said these changes reflected successive revisions arising from the change in base year, improved data sources and methodologies, and updated indicators.
It also pointed out that the earlier ₹86.05 lakh crore estimate under the old 2011-12 series cannot be directly compared with the current Q1 2026-27 estimate under the revised 2022-23 series.
The relevant comparison, it said, is between estimates from the same and latest comparable series.
GDP deflator differs from CPI and WPI
On the difference between the 2.5 per cent implied GDP inflation rate, consumer inflation of 3.9 per cent and wholesale inflation of over 9 per cent, the Ministry said the divergence was due to the different coverage and purposes of the three measures.
The Consumer Price Index (CPI) captures price changes for a specific basket of household consumption, while the Wholesale Price Index (WPI) covers bulk commodities, raw materials and manufactured goods at the wholesale level and excludes services.
The implicit GDP deflator, on the other hand, is derived from the ratio of GDP at current prices to GDP at constant prices and covers the economy as a whole, including government expenditure, investment, exports and a wide range of financial and non-financial services.
The Ministry said high raw material prices and relatively low inflation in certain service sectors could result in the GDP deflator being significantly different from CPI or WPI.
It added that more than 300 individual price deflators are used at the item or item-group level in GDP compilation, with the implicit GDP deflator serving as a derived measure reflecting their overall price impact.
Double deflation not used directly for PFCE
The Ministry also explained that the double-deflation methodology is not directly used to calculate Private Final Consumption Expenditure (PFCE).
Double deflation is a production-side technique used to estimate industry-level GVA at constant prices by separately deflating gross output and intermediate consumption.
PFCE measures final expenditure on goods and services and therefore has no intermediate consumption to subtract. At the quarterly level, PFCE is estimated at a detailed item and item-group level using appropriate volume indicators and price indices.
For goods such as food and manufactured products, constant-price estimates are compiled first using appropriate volume indicators, while current-price estimates are subsequently derived using relevant CPI measures. For services such as education, health, restaurants and accommodation, current-price estimates are compiled using relevant output indicators and constant-price estimates are derived using appropriate price indices.
Mining sector’s nominal and real GVA gap explained
The Ministry also explained the significant difference between nominal and real GVA growth in the Mining and Quarrying sector.
Real GVA growth in the sector stood at -2.4 per cent in Q1 2026-27, broadly consistent with mining IIP growth of -3.8 per cent in April, -1.4 per cent in May and 1.6 per cent in June.
However, prices of several minerals increased sharply during the quarter. The PPI for Mining and Quarrying recorded inflation of 22 per cent in April, 21.2 per cent in May and 15.5 per cent in June.
In particular, prices of crude petroleum and natural gas rose by 69.5 per cent, 72.2 per cent and 33.7 per cent, respectively, during April, May and June. Mining of metal ores recorded inflation of 27.6 per cent, 25.2 per cent and 23.5 per cent during the same months.
As a result, nominal GVA in Mining and Quarrying grew by 22.3 per cent in Q1 2026-27, despite the contraction in real GVA.
The Ministry said the divergence was primarily driven by strong increases in mineral prices, particularly crude petroleum, natural gas and metal ores.
Statistical discrepancy may change with revisions
Addressing concerns over the relatively high statistical discrepancy in current and constant-price GDP estimates for Q1 2026-27, the Ministry said the discrepancy is a statistical balancing item arising from differences between GDP estimates compiled through the production and expenditure approaches.
It cautioned that the discrepancy by itself should not be interpreted as evidence that GDP has been understated or overstated.
The Q1 estimates are based on information available at the current stage and remain subject to revision as more comprehensive and updated data become available.
The Ministry said the discrepancy may change in subsequent revision rounds, but its current level cannot be used to conclude that GDP will necessarily be revised upward or by any particular magnitude.
At the time of release of final estimates at current prices, the discrepancies are expected to become very small or zero, as was the case with FY 2022-23 and FY 2023-24, the Ministry said.
