India Unveils New GDP Series with Enhanced Accuracy Using 600 Deflators

India’s Statistics Secretary, Saurabh Garg, announced the introduction of a new series for calculating the country’s Gross Domestic Product (GDP), incorporating nearly 600 item-level deflators to enhance accuracy. This move, which shifts the base year to 2022-23, aims to minimize reliance on older economic indices that could distort growth figures. Garg’s insights come ahead of the anticipated release of the updated GDP data.

The new GDP series marks a significant methodological shift, increasing the number of deflators from approximately 180 in the previous model to nearly 600. Garg explained that this change allows for a more granular approach to measuring economic activity, leading to improved precision in real growth estimates. “We are using deflators that are at a very disaggregated or item-wise level,” he stated.

While some concerns have been raised regarding the potential impact of the older Wholesale Price Index (WPI) on growth calculations, Garg reassured that the new series will maintain consistent price collection methods at the item level. “At the item level, the prices and methodology remain the same. So, we don’t expect much distortion, because the prices are current in any case,” he noted. He referenced the stability of Consumer Price Index (CPI) estimates, where item-level price data showed consistency despite changes in base year calculations.

Aligning with International Standards

In terms of future revisions, Garg indicated that India aims to align its GDP base revision practices with international norms, which typically recommend adjustments every five years. “For GDP base revisions, the international norm is approximately every five years, which is expected to be followed,” he said. This approach is intended to ensure that India’s economic data remains relevant and reflective of current realities.

One of the most notable enhancements in the new GDP series is related to how the household sector is measured. Historically, this sector has been a focal point of debate regarding its contribution to India’s overall GDP. By integrating the Supply-Use Table (SUT) framework with national accounts, officials hope to address discrepancies that have long existed between GDP measured through production and expenditure approaches.

Minimizing Discrepancies through Integration

The SUT framework is designed to reconcile what industries produce with the actual usage of goods and services in the economy, ensuring that total supply aligns with total demand. Garg emphasized the importance of this integration in minimizing discrepancies in the new GDP series. “Integration of SUT with the National Accounts Framework will help minimize discrepancies in the new series,” he stated.

This comprehensive update to India’s GDP calculation methods reflects a commitment to providing more reliable economic data, thereby instilling greater confidence among policymakers, investors, and the general public. As the new series is implemented, stakeholders will be closely monitoring its impact on economic assessments and policy decisions in the coming months.