​New reality: on new series of national accounts data

The release of the new series of national accounts data is a heartening improvement to India’s key economic statistics, but the data highlights some aspects that merit policy attention. The new series updates the base year of India’s Gross Domestic Product and Gross Value Added data to 2022-23 from the earlier 2011-12. This was a long-overdue update, since the earlier data was becoming more outdated and unrepresentative with each passing year. Apart from the updated base year, the new series has several methodological improvements and new data sources for greater robustness. For example, the adoption of the double-deflator approach, which accounts for the effect of inflation separately for intermediate goods and the final product, is a marked improvement in terms of ascertaining the real value added of India’s production. Similarly, the new series allocates multi-sector company output proportionately, improving sectoral data accuracy. The data on households will now be obtained from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and Periodic Labour Force Survey (PLFS) on an annual basis instead of relying on extrapolations as was done in the 2011-12 series. Notably, the Goods and Services Tax data, a goldmine of consumer data, will be used in the new series. The new series will also include new sources and methods of estimation for sectors that have historically been difficult to quantify such as the agricultural sector and the vast informal sector. All of these should yield a more accurate picture of India’s economic size and growth.

The new series predicts India’s GDP to grow 7.6% in the current financial year 2025-26, which is faster than the 7.4% predicted for the year in the old series. While the rate might bring cheer, the new absolute size of the economy is somewhat sobering. The new series pegs India’s economy at ₹345.47 lakh crore in 2025-26, which is about 3.3% smaller than what was predicted based on the old series. The size of the economy in both 2023-24 and 2024-25 was also revised downward by 3.8% each. Along with the depreciation of the rupee, this has meant that India is currently a $3.8 trillion economy, with the $5 trillion target moving further away. A smaller economic size also means the Centre’s various commitments to lower the fiscal deficit and debt — ratios that are pegged to nominal GDP — also become that much tougher to achieve. That said, it is better to realign targets based on more accurate data than to blithely forge ahead with decade-old metrics.