UPSC Syllabus Topic: GS Paper 3 –Economy.
Introduction
India’s national accounts have again received a ‘C’ grade in the IMF’s 2025 review, even as recent GDP growth numbers are strong. This low grade means that key data used to track the economy have shortcomings that hamper proper surveillance. The IMF links these gaps to outdated base years, methodological weaknesses and limited coverage, at a time when India is preparing a broad overhaul of its statistical system.
IMF’s assessment of India’s national accounts
Data adequacy assessment process and evolution
- The IMF’s assessment is part of its Article IV consultations, in which IMF staff visit India, examine the data, and discuss economic developments and policies with officials.
- Till 2016, India’s data were described as “adequate for surveillance”, and from 2017 to 2023 they were termed “broadly adequate”.
- From 2024, the IMF started using an explicit A–D grading system. In that year, India received an overall ‘B’ grade for its data and a lower ‘C’ grade for national accounts. The same grading has been repeated in the 2025 review.
Major findings
- Overall grade and implication: India’s overall data received a ‘B’ grade, but its national accounts were given a lower ‘C’ grade. A ‘C’ grade means the data have shortcomings that somewhat hamper surveillance of the economy.
- Base year problem: India’s GDP series still uses the 2011-12 base year, which the IMF considers outdated and in need of rebasing.
- Use of WPI instead of PPI: India continues to use the Wholesale Price Index (WPI) as a deflator in many sectors because Producer Price Indices (PPI) are not available.
- GDP measurement discrepancies: There are sizeable discrepancies between the production and expenditure approaches to GDP. This points to gaps in coverage and methods.
- CPI grade and impact: The Consumer Price Index receives a ‘B’ grade because its base year, basket and weights are outdated. The heavy weight of food and the old base year make it harder to capture current price movements, which can impair monetary policy decisions by the RBI.
- Other data categories graded ‘B’: Government finance statistics, external sector statistics, monetary and financial statistics, and inter-sectoral consistency are all graded ‘B’.
- Informal sector coverage: The IMF flags inadequate coverage of the informal sector, which weakens the reliability of overall growth estimates.
- Lack of seasonal adjustment: Quarterly national accounts are not seasonally adjusted, and other statistical techniques also need improvement.
- Limited data granularity: There is limited granular detail, especially in investment data and quarterly breakdowns, which restricts deeper analysis of trends.
Major Recommendations
- Improve data quality and timeliness: The IMF recommends improving the quality, availability, and timeliness of macroeconomic and financial statistics to support better policy decisions.
- Regular revision of key statistics: It suggests regular revisions of national accounts, prices, and other key statistics, in line with international best practices.
- Priority to population census: The IMF advises conducting the population census on a priority basis to update core demographic and economic benchmarks.
- Timely consolidated fiscal accounts: It calls for timely provision of consolidated general government (Centre plus States) fiscal accounts to strengthen overall macro-fiscal surveillance.
India initiative on its national accounts
- Updating GDP series
- India is preparing a new GDP series with 2022-23 as the base year.
- The first quarterly estimate under this series, for October–December 2025, along with the second advance estimate for 2025-26, will be released on February 27, 2026.
- The series will involve changes in methodology and new data sources.
- New CPI and IIP series
- A revised CPI series, based on the 2023-24 Household Consumption Expenditure Survey with 2024 as the base year, will be released on February 12, 2026.
- A revised Index of Industrial Production is also planned, using 2022-23 as the base year.
- Improved methods: The 2011-12 GDP series had already improved estimation by using MCA-21 corporate data instead of the Annual Survey of Industries. The next round plans to include GST data in GDP estimation, enhancing coverage of the organised sector.
- More frequent external sector data: The Reserve Bank of India intends to publish Balance of Payments data monthly in addition to quarterly releases, increasing frequency and timeliness.
Conclusion
India’s ‘C’ grade for national accounts is a clear warning that data gaps and delays are constraining economic surveillance and policy design. At the same time, the planned overhaul of GDP, CPI, IIP and Balance of Payments statistics shows that corrective steps are underway. Bridging these gaps quickly is essential for credible, inclusive and well-informed economic governance.
Question for practice:
Examine the IMF’s major findings and recommendations on India’s national accounts and their impact on economic policymaking.
Source: The Hindu, Indian Express
