Major changes in the headline data
1. Nominal GDP is revised down by 2.9 per cent for FY23, similar to the downward revision of 3 per cent seen in the previous base revision of 2011-12. Notably, PFCE has been revised down by a massive 9.7 per cent in FY23, which means that it accounted for only 57.1 per cent of GDP under the new series, much lower than the 61.5 per cent estimated earlier. Total investments (gross capital formation or GCF) were revised down slightly by 0.6 per cent and imports of services were scaled back by 20 per cent (Figure 1).
2. Since headline GDP is arrived using gross value added (GVA) estimates, it is instructive to note that nominal GVA was revised down by 3.6 per cent in FY23. Details confirm that ‘agriculture’ (led by crops, and forestry and logging) and ‘real estate, ownership of dwellings and professional services (RE, OD & PS)’ saw an upward revision of 7 per cent and 9 per cent, respectively, while all other major sectors such as ‘manufacturing’, ‘construction’, ‘trade & repair services’ and ‘transport’ were revised downward by 1.5 per cent, 2.9 per cent, 36 per cent and 15 per cent, respectively (Figure 1).
3. Under 2011-12 nominal GDP data, the share of ‘discrepancies’ had increased to about 2 per cent of nominal GDP during FY23-FY24, which is now reduced to ‘nil’ under the new series. ‘Discrepancies’, however, continue to remain in quarterly data because of a lack of enough data to estimate consumption and investments in the economy more robustly. Further, there is no way to remove discrepancies in real GDP.
Some economic narratives remain unchanged
4. Private corporate capex remains unchanged at low levels: As the share of PFCE is revised down, the share of investments is revised up to 34.4 per cent of GDP in FY23, from 33.6 per cent estimated earlier. Within GCF, corporate capex (private and public financial and non-financial) is estimated at 15 per cent of GDP in FY23, slightly lower than the 15.3 per cent estimated earlier. Within the corporate sector, private corporate capex is revised down, while it is revised up slightly for the public corporate sector. Household and government capex are revised up (Figure 2).
5. Household income grew slower than previously estimated: At the same time, household income, also called personal disposable income (PDI), has been revised down by 1 per cent in FY23 and 3.6 per cent in FY24, which implies that PDI grew 8 per cent year-on-year (YoY) in FY24, according to the new GDP data, weaker than the 11 per cent YoY growth estimated earlier. It increased by only 8.8 per cent YoY in FY25, lower than nominal GDP growth of 9.7 per cent, according to the new data.
New findings/narratives in the new GDP series
6. Unincorporated enterprises and quasi-corporate sector likely weaker than earlier estimated: One of the biggest improvements in new GDP data has been the estimation of the informal or unorganised sector. With the monthly labour force survey and quarterly/annual survey of unincorporated sector enterprises, the government is better equipped to make direct and more reliable estimates of India’s informal sector. This is visible from two changes. First, although private corporate capex has been revised down, the primary source of this data — the Ministry of Corporate Affairs — remains unchanged. The only possible explanation for the downward revision then can be the quasi-corporate sector. This could also explain the downward revision in GVA of the private corporate sector. Second, while household capex has been revised up, their investment in ‘machinery and equipment’, which is done by unincorporated enterprises, has been revised down. This possibly indicates that producers within the household sector, also called the unincorporated sector enterprises, have been weaker than previously estimated.
7. Gross domestic savings (GDS) have jumped sharply in FY24/FY25: The most surprising part of new GDP is gross domestic savings. For the base year, India’s GDS has been revised down to 29.8 per cent of GDP from 30.7 per cent estimated earlier (Figure 3). This downward revision was led by private non-financial corporations (NFCs) and government dis-savings, though household physical savings (based on the new Central Statistics Office [CSO] survey) are revised up, with slight upward revision in household net financial savings (NFS) to 5.3 per cent of GDP, from 5 per cent estimated earlier.
GDS, however, has been revised up by almost 2 percentage points (pp) of GDP to 32.8 per cent in FY24 and further to 34.9 per cent in FY25, mainly led by the household sector. Not only physical savings, but household (HH) NFS have been revised up by 0.7pp to 5.9 per cent of GDP in FY24 and further to 7.1 per cent in FY25, which is surprising since the Reserve Bank of India (RBI) data — the primary provider of this data — estimates it at 5.3 per cent and 6 per cent of GDP, respectively. The only change introduced by the CSO in this respect is to take data on equity market investments from the Securities and Exchange Board of India (Sebi). This can explain 0.3-0.4pp of GDP, but such large divergence between the RBI’s and CSO’s estimates is very perplexing. A sharp improvement in government’s dis-savings also seem overestimated. Notably, a large part of upward revision in total investments due to higher GDS is actually unexplained, and thus, counted as ‘errors and omission’.
Key learnings, lessons and confusions from new GDP series
The new data confirms the continuation of the old economic narrative, as corporate capex remains weak and PDI growth has been revised down. It also suggests that the informal sector (i.e., unincorporated and quasi enterprises) is actually weaker than previously estimated. At the same time, we learn that the residential property market (or consumers’ capex) has been much higher.
What, however, remains unconvincing — at least to me — is the sharp jump in GDS during the past two years – from 29.8 per cent in FY23 to 34.9 per cent of GDP in FY25. Although FY25 data will undergo revision, and it is very likely that it will be revised down, a pick-up in FY24 — at 32.8 per cent of GDP versus 30.7 per cent estimated earlier — is entirely because of the household sector. While higher physical savings can be attributed to the new surveys, the large difference between RBI’s and CSO’s estimates of household NFS is surprising.
What does it mean for future growth?
With almost 3 per cent downward revision in nominal GDP, fiscal deficit now is budgeted at 4.5 per cent of GDP for FY27, higher than the original target of 4.3 per cent. Debt-to-GDP stands at 57.5 per cent in FY26RE, compared to the previous estimate of 56.1 per cent. All-in-all, if the central government sticks to its debt targets of 50% (+/-1 per cent) by FY31, it means the fiscal drag on economic growth will be more pronounced than earlier. Will the government revise their debt-to-GDP targets higher or spending growth downward to meet old targets? We may need to wait for some time to find out.
On the private sector, will consumers continue to grow their physical savings (boosting construction and real estate sectors) with weak income growth? It is very likely that as we have seen weak consumption growth, physical savings may also grow slowly, hurting economic growth. The corporate sector, we expect, will continue to keep capex growth subdued, as global economic uncertainties continue to linger and actually intensify with the West Asia war. That’s why, we forecast real GDP growth to moderate from 7.7 per cent in FY26 to around 6.5 per cent next year with downward risks.
The writer is India economist, executive director at CLSA India and author of The Eight Per Cent Solution
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