India to Unveil Revised GDP Data Series with Enhanced Methodology
India is poised to release its inaugural set of Gross Domestic Product (GDP) figures based on a newly developed national accounts series this week. This significant update aims to address recent criticisms from economists and international bodies regarding the country's statistical framework. The government has undertaken a comprehensive revamp of the methodology used to estimate real GDP growth, which will be implemented through this fresh data series.
Addressing Criticisms from the IMF and Economists
The revised framework incorporates more sophisticated price deflation techniques to respond to concerns raised by economists. Real GDP in India is calculated by adjusting nominal growth figures for inflation using price indices. Critics have long argued that the existing approach is outdated because it relies heavily on the wholesale price index (WPI) rather than the more widely followed consumer price index (CPI).
In November, the International Monetary Fund highlighted several shortcomings in India's national accounts system. The IMF pointed to the continued use of the 2011–12 base year, excessive dependence on wholesale price data, and extensive reliance on single-deflation techniques. As a result, the IMF assigned India's methodology a "C" rating, indicating significant room for improvement.
Key Changes in the New GDP Series
Saurabh Garg, secretary in the Ministry of Statistics and Programme Implementation, explained the enhancements in an interview. "We will now use about 500–600 items from the new CPI and the old WPI series, compared with about 180 earlier, to deflate the output and improve accuracy of the data," he stated. This approach will remain in place until a revised WPI series is introduced, which is expected in the near term.
Under the earlier system, periods marked by subdued nominal GDP expansion and low wholesale inflation often resulted in inconsistencies. These conditions tended to produce comparatively higher real growth estimates, raising questions about data reliability.
Projected Economic Growth and New Base Year
According to the current data series, India's economy—one of the fastest-expanding among major global economies—is projected to grow by 7.4% in 2025–26. This compares with an estimated 6.5% growth in 2024–25. Nominal GDP, which measures economic output at prevailing market prices, is expected to increase by 8.0% during the current financial year.
A revised GDP series with 2022–23 as the base year will be released on February 27, along with updated historical data covering the previous four years. These modifications form part of a wider overhaul of India's statistical framework, following the introduction of a new retail inflation series earlier this month. Updates to the wholesale price index and industrial production data are also in progress.
Adoption of Double Deflation Technique
A key element of the revised framework is the adoption of double deflation, which adjusts both output prices and input costs separately to derive real value added. Garg emphasized that these changes are expected to enhance data precision, particularly in the manufacturing sector. In this sector, differences between input and output price movements had previously raised concerns about distortions under the single-deflation approach.
The new methodology aims to provide a more accurate reflection of economic activity, ensuring that India's GDP data meets international standards and addresses the valid concerns of economists and institutions like the IMF.
