Syllabus- GS 3- Indian Economy
Introduction
India has revised its GDP base year from 2011–12 to 2022–23, marking a major reform in its statistical framework. This update improves accuracy, detail, and global comparability of national income data-crucial for evidence-based policymaking under the Viksit Bharat vision.
The revision reflects India’s rapid structural changes, including growth in digital services, renewable energy, and the gig economy, which were underrepresented earlier. The new series follows the System of National Accounts (SNA) 2008 and aligns with the IMF’s Quarterly National Accounts Manual 2017.
| Key Growth Numbers: The revised GDP estimates paint a robust picture of India’s economic momentum: • Real GDP growth for FY 2025–26 is estimated at 7.6%, up from 7.1% in FY 2024–25. • Nominal GDP (at current prices) is projected to grow by 8.6% in FY 2025–26. • The manufacturing sector has recorded double-digit growth in both FY 2023–24 and FY 2025–26. • Secondary and tertiary sectors have exceeded 9.0% growth in FY 2025–26. • The ‘Trade, Repair, Hotels, Transport & Communication’ sector grew at 10.1% at constant prices. • Q3 (October–December 2025–26) real GDP stands at ₹84.54 lakh crore — a 7.8% growth, accelerating from 7.4% in Q3 FY 2024–25. |
Key Structural Changes in the New Gross Domestic Product (GDP) Series
1. Revised Base Year (2022–23): The base year has been updated from 2011–12 to 2022–23 to reflect the current economic structure. The year was chosen as a normal post-pandemic year, improving comparability and accuracy.
2. Improved Sector-wise Estimation:
○ Private corporate Gross Value Added (GVA) is now allocated using an activity-wise revenue share method instead of the dominant-sector approach.
○ Better coverage of the general government sector, including housing services and autonomous/local bodies.
3. Better Measurement of Household and Informal Sector: Annual Survey of Unincorporated Sector Enterprises (ASUSE) and Periodic Labour Force Survey (PLFS) are used for direct annual estimation, improving coverage of informal enterprises and unincorporated activities.
4. Enhanced Consumption and Demand Estimation: Private Final Consumption Expenditure (PFCE) is estimated using Household Consumer Expenditure Surveys, production data, and administrative datasets, strengthening domestic demand assessment.
5. Expanded Use of Administrative and GST Data: Greater use of Goods and Services Tax (GST) data, Ministry of Corporate Affairs filings, and other administrative records improves formal sector measurement and reduces estimation errors.
6. Methodological Upgrade – Double Deflation and SUT Integration:Adoption of double deflation (separate adjustment of inputs and outputs) and integration of Supply and Use Tables (SUT) enhance consistency between production and expenditure estimates and reduce statistical discrepancies.
7. Improved Financial and Agriculture Sector Estimation: Use of Reserve Bank of India (RBI) banking data, actual financial data of Non-Banking Financial Companies (NBFCs), and updated agriculture datasets improves estimation of financial services, livestock, fisheries, and related activities.
Key Challenges in India’s New GDP Series
- Methodological Complexity: Implementation of double deflation and integration of multiple high-frequency data sources increase technical challenges.
- Informal Sector Measurement Gaps: Limited real-time data coverage of the informal and unorganised sectors affects estimate accuracy.
- State-Level Capacity Variations: Differences in statistical capacity across States and Union Territories hinder Gross State Domestic Product (GSDP) harmonisation.
- Back-Series and Data Lag Issues: Delay in releasing historical back-series data limits long-term trend analysis.
- Transition to SNA 2025: The United Nations Statistical Division is transitioning to the System of National Accounts (SNA) 2025, expected for global adoption around 2029–30. India will need another major revision in its next base year update to remain aligned.
Way Forward
- Complete Price Index Reforms: Expedite the revised Wholesale Price Index (WPI) series and introduce the Producer Price Index (PPI) for better price deflation.
- Strengthen State Statistical Systems: Enhance Gross State Domestic Product (GSDP) estimation capacity in States and Union Territories with support from the National Statistical Office (NSO) and the Ministry of Statistics and Programme Implementation (MoSPI).
- Integrate Real-Time Administrative Data: Expand the use of Goods and Services Tax (GST), Public Financial Management System (PFMS), e-Vahan, and Employees’ Provident Fund Organisation (EPFO) data to reduce estimation delays.
- Improve Transparency: Publish detailed “Sources and Methods” documentation to boost credibility and allow independent scrutiny.
- Align with Global Standards: Initiate preparations for adopting System of National Accounts (SNA) 2025, especially in digital economy and environmental accounting.
Conclusion
The revision of India’s GDP base year to 2022–23 is a significant stride in building a credible, modern, and internationally aligned statistical system. By integrating richer data sources, deploying advanced methodological tools like double deflation and SUT-balancing, and expanding coverage of the informal and digital economy, the new series provides a far more accurate mirror of India’s economic reality.
Question for Practice– India has revised its Gross Domestic Product (GDP) base year to 2022–23, introducing significant methodological and structural changes in national income estimation. Discuss the key structural reforms introduced in the new GDP series. Also briefly highlight the major challenges associated with its implementation.
Source- PIB
