Context
- Recently, the Ministry of Statistics and Programme Implementation (MoSPI) has officially transitioned the Indian economy to a new GDP series by shifting the base year from 2011–12 to 2022–23. This change aims to capture the structural transformations of the Indian economy, particularly the rapid growth of the digital economy, gig work, and updated consumption patterns.
- Along with the rebasing, the National Statistical Office (NSO) has released the Second Advance Estimates for FY 2025-26, projecting a real GDP growth rate of approximately 7.4-7.6%.
Key Highlights of India’s New GDP Data
1. Revision of Base Year (2022-23)
- The base year for Gross Domestic Product (GDP) and the Index of Industrial Production (IIP) has been updated to 2022–23 to replace the decade-old 2011–12 series.
- The Consumer Price Index (CPI) base year is also being aligned to 2023–24 to better reflect the modern consumption basket of Indian households.
- Rebasing is a standard statistical practice recommended by the United Nations System of National Accounts (SNA) to ensure that economic data remains relevant to current market realities.
2. Methodological Upgrades
- Double Deflation: One of the most significant changes is the adoption of the “Double Deflation” method, where output and intermediate inputs are deflated separately to calculate Real Gross Value Added (GVA) more accurately.
- New Data Sources: The NSO is now leveraging big data from the Goods and Services Tax Network (GSTN), digital payment portals (though UPI value is used cautiously), and the Vahan dashboard for vehicle registrations.
- MCA-21 Database: Enhanced use of the Ministry of Corporate Affairs’ digital filings (MCA-21) allows for better coverage of the organized corporate sector compared to earlier survey-based methods.
3. Macroeconomic Projections (FY 2025-26)
- Real GDP Growth: The economy is estimated to grow at 7.4% to 7.6% in real terms, maintaining India’s status as the fastest-growing major economy.
- Nominal GDP Growth: Projected at approximately 8.0%, reflecting a narrowing gap between real and nominal growth due to easing inflationary pressures (GDP Deflator).
- Sectoral Performance:
- Services: Expected to grow at a robust 9.1%, driven by financial and professional services.
- Manufacturing: Estimated to rebound to 7.0% growth from lower levels in previous years.
- Agriculture: Anticipated to see a moderate growth of 3.1%.
4. Impact on Fiscal Indicators
- Denominator Effect: A potential upward revision in the absolute size of the GDP due to rebasing often leads to a statistical reduction in the Fiscal Deficit as a % of GDP and the Debt-to-GDP ratio, even if the absolute debt remains the same.
- Investment Rates: Indicators like Gross Fixed Capital Formation (GFCF) as a percentage of GDP may appear lower if the GDP base expands significantly.
Q. With reference to the recent revision of India’s Gross Domestic Product (GDP) series, consider the following statements:
1. The Ministry of Statistics and Programme Implementation (MoSPI) has shifted the base year for GDP from 2011–12 to 2022–23.
2. The adoption of the "Double Deflation" method involves deflating the value of output and intermediate inputs using the same price index.
3. A higher revised absolute GDP figure typically leads to a statistical decrease in the country's Debt-to-GDP ratio.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Solution: (b) Only two
• STATEMENT 1 IS CORRECT: MoSPI has indeed updated the base year to 2022–23 to better reflect the current structure of the Indian economy.
• STATEMENT 2 IS INCORRECT: Double Deflation involves deflating the value of output and the value of intermediate inputs separately using their respective price indices (e.g., WPI for inputs and CPI/WPI for output) to arrive at a more accurate Real GVA.
• STATEMENT 3 IS CORRECT: Since the Debt-to-GDP ratio is a fraction, an increase in the denominator (GDP) while keeping the numerator (Debt) constant results in a lower overall ratio.
