The Ministry of Statistics and Programme Implementation (MoSPI), on Monday, has released the SAEs (Second Advance Estimates) of GDP for the current financial year. These are the updates to the FAEs (First Advance Estimates) that was released on January 7. The main difference between the two estimates is that the SAEs are arrived at by incorporating the GDP data for the third quarter as well that is from October to December.
The GDP estimates for each financial year have to go through several rounds of revisions. Every year on January 7, the MoSPI releases the FAEs and then in the next month, comes the SAEs after the incorporation of Q3 data. By the end of May, the Provisional estimates would be released after further incorporation of the data of Q4 which goes from January to March. Each revision of the estimates benefit from more data and that makes the GDP estimates more accurate and robust.
The SAEs present a completely fresh picture of the nature of the nation’s recovery from the one that was presented by the FAEs. India’s overall GDP has 3 main engines of growth, the biggest one being PFCE ( Private Final Consumption Expenditure), which is the money that everyone spends in their personal capacity and it accounts for more than 55 per cent of the GDP. The second biggest contributor is the money that is spent by the private firms towards the rise in productive capacity which is known as the investment expenditure. This is shown as the GFCF (Gross Fixed Capital Formation) and it accounts for about 33 per cent of the GDP. The third and final is the GFCE (Government Final Consumption Expenditure).
The key observations about the recovery of the Indian economy after the slump due to COVID-19, based on FAEs were:
- Overall GDP was estimated to go past the pre-Covid level
- Recovery had to drive by the higher investments as was evident by the spike in the GFCF.
- The main concern was the poor levels of the PFCE which was fine before the pre-Covid levels.
The argument that was given was that overall GDP was likely to get back at the pre-COVID levels but private income and expenditure were far below pre-COVID levels. Even though the overall GDP and per capita GDP (income) has not really changed much but the PFCE, and per capita PFCE (expenditure) has risen. On the other hand, GFCE and GFCF have shown a decline in the SAEs.
As per the statement by Pronab Sen who is the former Chief Statistician of India, this is not the final picture. He said that during times of such upheavals, revisions were really significant.