ExplainSpeaking: 5 things to look for in the Second Advance Estimates of GDP today

What are ‘Advance’ estimates of GDP?

The current financial year is not yet over — it gets over on March 31. As such, any estimate of GDP (or India’s total economic output) is more like a forecast or an “advance estimate” of where the economy is likely to be at the end of the current financial year.

What differentiates the SAE from FAE is the additional information about the economic growth in the third quarter (October to December) of the financial year. The FAE were based on just the performance in the first two quarters (April to June and July to September).

The other additional importance of SAE is that they come along with the detailed growth estimates of Q3.

There is one more set of revisions that the government (Ministry of Statistics and Programme Implementation or MoSPI) shares alongside the SAE: The “First Revised Estimates” (FRE) of national income for the preceding financial year.

Predictably then, the SAE are more reliable estimates of where the economy is likely to end up, thanks to all the revisions that happen in the background.

However, it is important to note that the story of such revisions does not end with the SAE. The next set of revisions is called the Provisional Estimates (PE) of GDP and they will come out in May. The PE will, in turn, be revised to FRE in February next year (2026).

What should one look out for in the advance estimates of GDP?

Considering that the SAE are likely to get revised when the provisional estimates come out in May, it is a valid question to ask why bother about the SAE at all.

For one, it is a matter of policymakers availing themselves with the best and most up to date data at their disposal. The calculations — as will be shown in the data table alongside — for SAE can undergo all kinds of odd changes, thanks to the revisions in the preceding year’s data as well.

Here are five key things to watch out for in the SAE data.

Source: MoSPI, Express Research

1. Nominal GDP and its growth rates

Nominal GDP is the total market value of all the goods and services produced within India in the current financial year. It is not the “real” GDP as it includes the effect of inflation (or the annual increase in prices).

When Finance Minister Nirmala Sitharaman was presenting the Interim Union Budget last February, she pencilled in a nominal GDP of Rs 328 lakh crore (or trillion) for this financial year. When she presented the Union Budget after the Lok Sabha elections in July, she pencilled in a nominal GDP of Rs 326 lakh crore. The FAE published in January 2025 pegged the nominal GDP at Rs 324 lakh crore.

So the first thing to note would be the latest estimate for nominal GDP.

This number matters because it forms the base for all fiscal calculations — for example, fiscal deficit (or the amount of money that the government borrows) is calculated as a percentage of the nominal GDP. If the nominal GDP falls, the same amount of money borrowed by the government will show up as a higher percentage. Similarly, the real GDP will also likely get affected as it is calculated after taking away the effect of inflation from the nominal GDP.

As can be seen in the TABLE, nominal GDP can fluctuate a bit and so can the growth rates. For instance, the nominal GDP went down in absolute terms between the FAE and SAE last year but the growth rate of nominal GDP went up. That’s because the GDP data for the preceding year (2022-23) was revised downwards; a lower base resulted in a higher growth rate despite the absolute number not being as high.

2. Real GDP and its growth rate

The difference between the real and nominal growth rates of GDP capture the effect of higher prices. As can be seen in the TABLE, the difference was not as high as the level of inflation a lot of consumers faced. This created a sense of disbelief among many observers and led to a controversy about the credibility of GDP numbers.

3. Per capita GDP and its growth rate

This variable is often ignored although it should not be as it tells the state of an average Indian’s income level. The fact is half the Indians must be below even this level of average income because per capita GDP is just an arithmetic mean of income, and not a median level of income. It is noteworthy that this growth rate lags the growth rate of nominal GDP.

Further, as can be seen from data, while the growth rate of the per capita income kept going up from one revision to another, the absolute number did not travel the same way.

4. The nature of India’s growth slowdown

The slowdown in GDP growth rate in the second quarter and its quantum — GDP grew by just 5.4% in Q2 of the current financial year — came as a shock to many observers. In response, some saw it as a temporary blip in India’s otherwise smart economic recovery since the pandemic. Others saw it as a reversion to mean — of India’s growth reverting back to the slow pace it had before the pandemic; India’s GDP grew at less than 4% in 2019-20.

The SAE will shed more light on this issue as it provides clarity on what happened to the growth momentum in the third quarter that ended in December.

5. The story of 2023-24

As the data in the TABLE shows, growth data for 2023-24 (previous financial year) underwent considerable revisions just between the FAE and the Provisional Estimates. For instance, the real GDP growth rate was revised up from 7.3% to 8.2%.

With the FRE being made available, it would become more clear what happened to the economy in the previous financial year.

Watch out for the explainer on indianexpress.com when the GDP data comes out on Friday evening (February 28).

Share your queries and views at udit.misra@expressindia.com

Take care,

Udit