IMF Gives India a ‘C’ on Its GDP and Other National Accounts Data

Syllabus: GS3/ Economy

In News

• The International Monetary Fund (IMF) has assigned India a ‘C’ grade for the quality of its national accounts statistics, marking one of the lowest ratings for a major economy.

Why the IMF Gave a ‘C’ Grade?

• Outdated Base Year (2011–12):
  • India still uses the 2011–12 base year for GDP, CPI, and IIP.
  • Consumption patterns, production structures, technology adoption, and relative prices have changed significantly since then.
  • An old base year distorts real growth rates, inflation, and sectoral weights.
• Inaccurate Representation of Inflation:
  • CPI received a lower grade (‘B’ instead of ‘A’) due to:
    • Outdated base year
    • Excessive weightage of food items
  • This reduces the accuracy of inflation measurement, affecting RBI’s monetary policy.
• Weak Capture of Informal Sector:
  • India’s informal sector remains underestimated, as it is largely unregistered, cash-based and outside formal data systems.
  • This leads to mismeasurement of GDP levels, employment trends, and welfare outcomes.
• Delays in Data Revisions:
  • Global best practice recommends base year revision every 5 years.
  • India has not implemented a revision for over a decade, reducing timely alignment with economic reality.
• Need for Better Use of Modern Data Sources:
  • While corporate sector data is now collected via MCA-21, several gaps remain.
  • Integration of GSTN data for estimating value added has yet to be fully operational.

How do IMF’s Data Grades Work?

• The IMF assesses national statistics under its Data Quality Assessment Framework (DQAF), which evaluates methodological soundness, accuracy and reliability, serviceability (timeliness, periodicity, consistency), accessibility, & assurance of integrity.
• Grading Categories are:
  • Grade A – High compliance with international standards
  • Grade B – Acceptable but with notable deficiencies
  • Grade C – Significant weaknesses affecting surveillance
  • Grade D – Poor-quality data seriously limiting analysis

Possible Implications of the ‘C’ Grade

• Weak Policymaking Precision: Faulty or outdated data affects fiscal planning, inflation targeting, monetary policy & sector specific interventions. 
• Reduced Credibility of Economic Numbers: Global investors, rating agencies, and financial institutions may view India’s data with greater caution.
• Inaccurate Growth and Welfare Assessment: Misestimation of the informal sector may hide real growth performance, employment distress & household-level vulnerabilities.
• Impaired Monetary Policy: If inflation is mismeasured, the RBI’s policy rates may not reflect true price pressures, affecting liquidity, borrowing, and growth.
• Pressure for Statistical Reforms: The IMF rating increases pressure on India to update base years, modernize survey systems & strengthen autonomy of statistical bodies.

Source: TH