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News: MoSPI clarified the -1.5% manufacturing GVA deflator in Q1 2026-27 and explained how double deflation produced it.
About Negative GVA Deflator for Manufacturing Sector
- Gross Value Added (GVA): It measures the value added by an industry to the economy.
- It is broadly calculated by subtracting the value of goods and services used as inputs from the value of production.
- Nominal GVA: It measures the value added at current prices, meaning it includes the effect of changes in prices.
- Real GVA: It shows the change in the value added by a sector after removing the effect of price changes.
- It is calculated as real output minus real intermediate consumption.
- Deflation: It means removing the effect of price changes from a current-price value to find its real value at constant prices.
- Double deflation: It is an accounting technique used to calculate real GVA by deflating gross output and intermediate consumption separately using individual price indices.
- Negative GVA deflator: It means that nominal GVA grows slower than real GVA.
- It does not mean that the prices of goods have fallen.
- It can occur when input prices rise faster than output prices.
Recent Finding in India
- In Q1 2026-27, manufacturing nominal GVA grew by 7.7%, while real GVA grew by 9.2%, as input prices rose faster than output prices.
- This resulted in a -1.5% implicit GVA deflator for the manufacturing sector.
- Thus, the -1.5% figure reflects the relative movement of output and input prices, rather than a fall in manufacturing output prices.
