Context:

  • Recently, According to the First Advance Estimates (FAEs) released by the government, India’s GDP will grow by 7.3% in the current financial year (2023-24) which is slightly faster than the 7.2% growth in 2022-23.

What are FAE?

  • They are presented at the end of the first week of January every year.
  • FAE are only the first estimates of growth for that particular financial year.
  • They are based on the performance of the economy over the first seven-odd months.
  • The data of first seven months is extrapolated to arrive at an annual picture.
  • The Ministry of Statistics and Programme Implementation (MoSPI) releases the Second Advance Estimates by the end of February and by the end of May, the Provisional Estimates are released.
  • With the availability of more and more data, the GDP estimates continue to be revised.
  • In the coming three years, MoSPI will release the First, Second, and Third Revised Estimates of this year’s GDP before settling on the final number, which are known as “Actuals”.
  • The Advance Estimates of National Income are indicator-based and are compiled using the benchmark-indicator method.
  • The estimates available for the previous year (2022-23) are extrapolated using the relevant indicators reflecting the performance of sectors are the benchmark indicator.

USE of FAEs:

  • The significance of the FAEs is that they are the last revised GDP data released before the finalizing of Union Budget for the coming financial year.
  • The FAEs constitute the base for the Budget numbers. As the Lok Sabha elections will be held in April-May of 2024 and a full-fledged Union Budget will not be presented this year.
  • The FAEs of this year also draw some additional significance from the fact that they will provide the first complete picture of economic growth in the 10 years of the government led by Prime Minister Modi.