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Economy

Correction: Wrong Deflator – It's Actually 1.5%

Yesterday we had said that the GDP deflator was 0.2%. This is wrong. The new method uses something called GVA – or Gross Value Added – to indicate the real increase in value that has been seen. And the GVA plus indirect taxes is the GDP. We took the real GDP versus the nominal GDP to calculate the deflator.

However, that is wrong. Indirect tax changes – like Excise or Service tax – is not “real” growth. We should therefore take the Gross Value Added in real terms, and compare it to nominal GDP (which includes indirect tax impact) to find out the true deflator. A deflator basically includes the effect of increase in prices (whether from taxes or inflation, we don’t care).

Thus we recalculated the deflator, and it is at 1.5%. Apologies for that, and here’s the updated graph.

 

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