India’s New GDP Series: Fixing Discrepancies, Updating Measurement

Syllabus: GS3/ Indian Economy

Context

• The Ministry of Statistics and Programme Implementation (MoSPI) has released a discussion paper outlining major methodological changes in India’s GDP estimation.

About

• In 2024, MoSPI has set up a 26-member Advisory Committee on National Accounts Statistics to decide the base year for GDP data.
  • Biswanath Goldar has been appointed as its chairman.
• For GDP, the new series is scheduled to be released on February 27, 2026 with financial year 2022-23 as base year.

About Gross Domestic Product (GDP)

• GDP is the total monetary value of all final goods and services produced within a country’s domestic territory during a specific period (usually a quarter or a year).
• Current base year used 2011–12.
• Released By: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).
• Calculation of GDP: GDP is calculated using three main methods;

• The Expenditure Approach: This method sums up all spending on final goods and services in the economy.
• The Income Approach: This method sums all incomes earned by factors of production (labor, capital).
• The Production/Value-Added Approach: This method adds up the value added by each industry at every stage of production.

What is Base Year?

• A base year is a benchmark year used for comparison in economic and statistical calculations. 
• It provides a reference point against which current values of indicators like GDP, CPI, and IIP are measured to track real changes over time.
• Significance: 
  • It allows us to remove the effect of inflation and see real growth.
  • Ensures that the data reflects the current structure of the economy, consumption patterns, and prices.

Need for the Change of the Base Year

• India’s economy has undergone structural changes due to digitisation, formalisation, GST, and changing consumption patterns.
• Existing GDP estimates rely partly on outdated surveys and static ratios, limiting accuracy.
• Persistent and volatile GDP discrepancies have reduced transparency and interpretability of growth numbers.
  • GDP is estimated using both production and expenditure approaches, but differences in data sources, coverage gaps, valuation methods, and time lags often lead to mismatches.
  • Large discrepancies result in significant revisions to GDP estimates later, reducing predictability and confidence among policymakers, investors, and analysts.

Key Changes in the New GDP Series

• Elimination of ‘Discrepancies’: MoSPI plans to integrate Supply and Use Tables (SUTs) directly into annual GDP compilation.
  • Supply and use tables show how different goods and services are supplied by domestic industries and imports and how they are distributed between different intermediate or final uses, including exports. 
  • This approach aims to limit discrepancies in early estimates and fully eliminate them in final estimates
• Use of Digital and Administrative Data: Increased reliance on datasets such as;
  • e-Vahan (vehicle registrations)
  • GST and other administrative records
• Updated Surveys as Data Backbone: Key surveys feeding into the new series include;
  • Household Consumption Expenditure Survey (HCES) 2022–23 and 2023–24.
  • Updated surveys of formal and informal enterprises.

Challenges Ahead

• GDP estimation remains methodologically complex, even with improved tools.
• Integrating multiple administrative datasets poses data quality and consistency challenges.
• Ensuring timely availability of reliable survey data is critical.
• Transition to a new series may initially create comparability issues for long-term analysis.

Concluding remarks

• The revision of India’s GDP series marks a step towards improving the accuracy, transparency, and credibility of national income statistics. 
• By updating the base year, and eliminating discrepancies the new framework is better aligned with the realities of a rapidly formalising and digitising economy.

Source: IE