After inflation, now a new mathematics of measuring GDP in the country will also emerge. This new mathematics will be announced on 27th February. Giving this information, the country’s top statistical officer said that India will make major changes in the way it calculates real GDP growth under the Revised National Accounts Series to be launched this week, and will adopt more detailed price deflation to address the concerns of economists.
India currently measures real GDP by deflating nominal GDP growth using a price index. Economists have expressed concern that this approach is outdated because it relies more on the wholesale price index rather than the more closely tracked consumer price index. Let us also tell you how the government is working on the new calculation of GDP.
Now this is how real GDP is determined
Saurabh Garg, secretary of the Ministry of Statistics and Program Implementation, said in a Reuters report that we will now use about 500-600 items from the new CPI and old WPI series to deflate the output and improve the accuracy of the data, whereas earlier about 180 items were used. He said that this practice will continue until the revised WPI series is released, which is expected soon. Under previous approaches, lower nominal GDP growth and lower wholesale inflation translated into higher real growth rates to make up the difference.
Under the old series, India’s economy – one of the world’s fastest-growing major economies – is projected to grow by 7.4 per cent in 2025/26, compared to 6.5 per cent in 2024/25. Nominal GDP – which reflects output measured at current market prices – is projected to grow 8 percent this year. A new GDP series with a 2022/23 base year will be released on February 27, along with back-series data for the last four years.
statistical overhaul
The changes are part of a larger shake-up in India’s statistics following the release of a new retail inflation series earlier this month. Changes are also being made in wholesale inflation and industrial output. In November, the International Monetary Fund expressed concern over weaknesses in India’s national accounts methodology. The IMF cited the outdated 2011/12 base year, reliance on wholesale prices and excessive use of single deflation. It gave the framework a “C” rating.
The main reason for this major change is the shift to double deflation, which adjusts output and input prices separately to measure real value added. Garg said the reforms would improve accuracy, especially in manufacturing, where differences in input and output prices had raised concerns under the earlier single-deflation method.