What has changed in the Central Statistics Office’s (CSO’s) estimate of the economy? The chart shows the difference between CSO’s first and second advance estimates of gross value added (GVA) in the Indian economy in 2016-17, at current prices. The first advance estimate was published on 6 January and the second on 28 February.
The first advance estimate had been made without taking the effect of demonetisation into account. The second estimate, made last Tuesday, presumably incorporates the impact of demonetisation. The difference between the two should therefore give an idea of the impact that demonetisation has had on the various sectors in the current fiscal year.
The chart shows that the manufacturing and “Trade, hotels, transport, communication and services related to broadcasting” sectors have had the highest upward revisions, indicating that they have been least affected by demonetisation. On the other hand, mining, construction and public administration sectors have seen downward revisions.
Indeed, CSO’s estimates of GVA for the economy as a whole show an upward revision of 1.09%. This suggests CSO believes that demonetisation has actually led to an upward revision in nominal GVA for the current year. That is rather awkward, as the monetary shock was expected to depress both output and prices. That is why so many economists are saying that the estimates are likely to see further downward revisions.