The government said a negative manufacturing GVA deflator in the first quarter of FY27 does not mean factory-gate prices fell, while the sharp gap between real and nominal mining GVA reflects higher mineral prices.
The Ministry of Statistics and Programme Implementation released the clarification after publishing the updated annual and quarterly GDP estimates with 2022-23 as the base year on Aug. 31. The six-question note addresses concerns around manufacturing, GDP revisions, the difference between CPI, WPI and the GDP deflator, private consumption, mining and statistical discrepancies.
The ministry said the updated estimates incorporate a new series of the Output Producer Price Index, or PPI, a Banking Services Price Index with 2022-23 as the base year, and updated data from administrative sources.
Manufacturing
The ministry said manufacturing recorded a negative implicit GVA deflator of 1.5% in Q1 FY27 even though both output and input prices increased because the sector now uses a double-deflation approach.
Under this method, the output of the manufacturing sector and its intermediate consumption are deflated separately. Real GVA is then calculated by subtracting real intermediate consumption from real output.
When input prices rise faster than output prices, nominal GVA can grow more slowly than real GVA. This can produce a negative implicit GVA deflator, the ministry said.
“A negative inflation in implicit deflator in manufacturing does not mean that manufacturing prices have fallen,” the ministry said.
In Q1 FY27, manufacturing nominal GVA grew 7.7%, while real GVA grew 9.2%, resulting in the negative 1.5% implicit GVA deflator. The ministry said input-price growth exceeded output-price growth in activities including textile manufacturing and cotton ginning, basic metals, and rubber and plastic products.
Agriculture follows a different quarterly calculation. The ministry said agricultural GVA is first compiled at constant prices using production estimates, after which current-price estimates are derived using the relevant PPI. The agricultural output PPI rose about 5% in Q1 FY27, helping keep implied inflation at 3.9%.
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GDP Revision
The ministry rejected the suggestion that the previous year’s current-price GDP was revised down to make the current year’s growth rate appear higher.
Q1 FY26 GDP at current prices was initially estimated at ₹86.05 lakh crore under the old 2011-12 base-year series. After the introduction of the 2022-23 base-year series in February 2026, the estimate was revised to ₹80.32 lakh crore. It was then updated to ₹80.44 lakh crore in June before being revised to ₹80 lakh crore after the new IIP and PPI data were incorporated.
The ministry said these changes resulted from the base-year change, updated data sources and methodologies, and new indicators rather than an attempt to mechanically raise the current year’s growth rate.
It also said the old ₹86.05 lakh crore figure cannot be directly compared with the Q1 FY27 estimate under the revised series.
For Q1 FY27 GDP of ₹88.27 lakh crore, the relevant comparison is the Q1 FY26 estimate of ₹80.32 lakh crore under the 2022-23 base-year series, the ministry said.
Price Gap
The ministry said the 2.5% implied GDP inflation rate can differ from consumer inflation of 3.9% and wholesale inflation of more than 9% because the three measures cover different parts of the economy.
The CPI measures price changes in a specific basket of goods and services consumed by households. WPI covers bulk commodities, raw materials and manufactured goods at the wholesale level, excluding services.
The GDP deflator, by contrast, is derived from GDP at current and constant prices and covers the entire economy, including government spending, corporate investment, exports and financial and non-financial services.
“The implicit GDP deflator need not move in line with either CPI or WPI,” the ministry said.
It added that the GDP deflator reflects the price impact of more than 300 individual price deflators used at the item or group level.
Consumer Spending
The ministry said double deflation does not directly enter the calculation of private final consumption expenditure, or PFCE.
Double deflation is used on the production side to calculate industry GVA at constant prices by separately deflating gross output and intermediate consumption. PFCE measures final demand and does not involve intermediate consumption to be subtracted.
At the quarterly level, the ministry said PFCE is estimated for individual items and groups. Constant-price estimates for goods such as food and manufactured products are first calculated using volume indicators, while current-price estimates are derived using relevant consumer price indices.
For services such as education, health, restaurants and accommodation, current-price estimates use relevant output indicators, with constant-price estimates derived using appropriate price indices.
Mining Gap
The ministry attributed the wide difference between real and nominal GVA growth in mining and quarrying to higher mineral prices.
Real GVA for the sector fell 2.4% in Q1 FY27, broadly consistent with the movement in the Index of Industrial Production. Mining and quarrying IIP growth stood at minus 3.8% in April, minus 1.4% in May and 1.6% in June.
At the same time, PPI data showed substantial price increases. Crude petroleum and natural gas prices rose 69.5% in April, 72.2% in May and 33.7% in June. Mining of metal ores recorded inflation of 27.6%, 25.2% and 23.5%, respectively.
The ministry said the price increases explain why nominal GVA growth in mining and quarrying reached 22.3% in Q1 FY27 despite the decline in real GVA.
“The substantial difference between real and nominal GVA growth is primarily a result of the strong increase in mineral prices,” the ministry said.
Future Revisions
The ministry said the statistical discrepancy in the Q1 FY27 GDP estimates should not, by itself, be taken as evidence that GDP has been overstated or understated.
The discrepancy is a statistical balancing item arising from differences between GDP estimates calculated through the production and expenditure approaches.
The Q1 estimates remain subject to revision as more comprehensive and updated data become available. The ministry said changes in the underlying production and expenditure estimates could alter the discrepancy in subsequent rounds.
However, the ministry said it “cannot be concluded in advance” that GDP will be revised upwards or by a specific amount. The direction and size of any revision will depend on changes to the underlying estimates rather than an automatic adjustment of the discrepancy.
At the time of the final estimates at current prices, the discrepancies are expected to be very small or zero, the ministry said, citing the experience of FY23 and FY24.
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