Why in news?

The Indian government released the latest GDP estimates, measuring the country's economic growth. GDP represents the market value of all goods and services produced within India over a quarter or financial year.

This article focuses on real GDP, which accounts for inflation and is calculated at constant price (Nominal GDP is calculated at current prices).

In Q2 of FY25 (July–September), GDP growth fell to 5.4%, signalling a sharp slowdown in India's economic momentum, surprising many observers.

What’s in today’s article?

• Advance estimates of GDP
• MoSPI's GDP Estimates Release
• Significance of the Sharp GDP Revision
• Key Takeaways

Advance estimates of GDP

• The financial year ends on March 31, so any GDP estimate before that is a forecast or an advance estimate of economic output.
• Five rounds of GDP estimates
  • First Advance Estimates (FAE): Based on Q1 (April–June) and Q2 (July–September) data. It is released in January of the relevant financial year.
  • Second Advance Estimates (SAE): Incorporates Q3 (October–December) data, making it a more reliable estimate. It is released in February of the same year.
    • Additional Revisions in SAE: SAE includes the First Revised Estimates (FRE) for the preceding financial year, providing a clearer economic picture.
  • Provisional Estimates (PE): Released in May, refining SAE projections.
    • It is released in May, includes Q4 data (January-March).
  • First Revised Estimates (FRE): Published in February 2026, further updating GDP data.
    • It is released in February the following year.
  • Final Estimates – Released in February, two years later.
• Thus, while SAE offers a better estimate, GDP figures continue to be revised for greater accuracy.

MoSPI's GDP Estimates Release

• The Ministry of Statistics and Programme Implementation (MoSPI) released three sets of GDP estimates:
  • GDP for the third quarter (October to December) of the ongoing financial year - It determines if the Q2 slump was temporary or a trend.
  • GDP forecast for the full year (Second Advance Estimates - SAE) - Projects GDP growth by March 31.
  • GDP estimates for the preceding two financial years - These include the First Revised Estimates (FRE) of FY24 and the Final Estimates of FY23
• Key GDP Updates
  • Quarterly GDP
    • Q3 GDP grew by 6.2% (YoY).
    • Q2 GDP growth revised up from 5.4% to 5.6%.
  • Annual GDP
    • FY24 GDP revised from 8.2% to 9.2%.
    • FAE for FY24 had initially projected 7.3% growth.
    • FY23 GDP revised from 7% to 7.6%.
  • 
  • FY24 GDP growth was revised up by 1.9 percentage points, a larger revision than even the COVID year (FY21).
  • Private Consumption Demand
    • Initially estimated at 4% growth in FY24, revised up to 5.6%.
    • This indicates stronger consumer demand than previously thought.
    • In FY25, private consumption is the primary driver of GDP growth, exceeding government and private sector investments.

Significance of the Sharp GDP Revision

• GDP data serve as the foundation for understanding India's economy. Weaker GDP data imply:
  • Lower tax collections for the government.
  • Lower corporate profits, which impact stock markets.
• One major reason why foreign investors are pulling out of Indian stock markets is the slump in corporate earnings.

Key Takeaways

• India’s economy performed better than expected until March 2024.
• GDP growth slowdown in FY25 is sharper than estimated, declining from 9.2% to 6.5%.
• Frequent and large GDP revisions affect the credibility of official data and economic assessments.