Q3 GDP-GVA divergence tied to reduced fertiliser subsidy: Govt official

The divergence in gross domestic product (GDP) and gross value added (GVA) data for the third quarter of FY24 could be attributed to reduced fertilizer subsidy disbursements, said a senior government official.

India's GDP spiked to a six-quarter high of 8.4% in Q3 FY24, surpassing estimates, while GVA growth stood at 6.5% during the same period, according to data from the statistics ministry.

"The government operates on a cash basis, not accruals, accounting only for cash payments," explained Madan Sabnavis, chief economist, Bank of Baroda. "With actual spending on food and fertilizer subsidies totaling 70-75% of revised estimates, it suggests the government hasn't fully disbursed subsidies, causing the disparity between GDP and GVA."

In the revised budget estimates for FY24, the government increased the allocation for fertilizer subsidy to ₹1.89 trillion from the initially budgeted ₹1.75 trillion.

GVA quantifies the value of goods and services produced in a country, deducting the cost of inputs and raw materials. It adjusts GDP by factoring in subsidies and taxes on products.

In the April 2023-January 2024 period, the Centre provided about ₹1.71 trillion as fertiliser subsidy, according to a parliamentary submission by minister of state for chemicals and fertilisers Bhagwanth Khuba, last month.

However, the budgeted estimates for fertiliser subsidy, at ₹1.64 trillion, for FY25 is lower than the revised estimates for FY24.

The Centre had revised the fiscal deficit target for FY24 to 5.8% of GDP, from 5.9% estimated earlier, following higher-than- expected tax collections, and higher dividends from public sector banks and the Reserve Bank of India (RBI). “The government is trying to meet its revised fiscal deficit target for FY24,” the official said, seeking anonymity,

Profits reported by state-owned banks crossed ₹98,000 crore during the first three quarters of FY24, and are expected to exceed ₹1.30 trillion by March-end.

RBI also disbursed a record ₹87,416 crore dividend for FY24, helping the Centre in revising its budget estimates. In comparison, in FY23, RBI's dividend payout stood at ₹30,307 crore.

During the first 10 months of FY24, the government achieved 90% and 81% of its non-tax revenue and tax revenue targets for the financial year, respectively, according to the latest data from the statistics ministry. The Centre's non-tax revenue target for FY24, according to revised estimates, stands at ₹3.76 trillion, while the tax revenue target is at ₹23.24 trillion.