Double deflator approach in gva estimation for Indian manufacturing sector

Following the System of National Accounts recommendations about the use of suitable deflators to remove the price effects from nominal values to estimate the real gross value added (GVA), this paper proposes a double deflator approach for estimating organized manufacturing sector GVA using quarterly estimates of listed companies’ results at an aggregated and disaggregated level. Using the Supply and Use table, the price deflators of output prices and input prices are estimated for manufacturing sectors at the aggregated level as well as at the NIC 2-digit level. The findings suggest that the output prices and input prices vary widely across sub-sectors of manufacturing depending upon the final output and choice of inputs across these sectors. Further, the relative contributions of output and inputs in sectoral GVA amplify these price variations at the aggregate level. The industry heterogeneity, therefore, should be factored into the doubledeflator approach for estimating real GVA. Unlike other studies that are based on the aggregate level double-deflator approach, this analysis establishes the importance of sub-sectoral variations in the aggregate GVA estimation for the Indian manufacturing sector.