Amid the ongoing crisis in West Asia, the Indian economy is expected to take a hit: the World Bank’s latest projections suggest that the country’s GDP growth could fall to 6.6 percent in this financial year.
The government’s own projections, released earlier this year, tell a more upbeat story though – GDP growth of 7.6 percent in the current financial year, after recent updates were made in the way India measures economic growth. The update itself was the result of a revision of the base year for computation of the GDP from 2011-12 to 2022-23, done by the Ministry of Statistics and Program Implementation.
A revision such as this is usually conducted once in every five years, where a “normal” year (without any major shocks or unusual activities) is chosen as the new base year. For India, disruptions in economic activity from the rollout of the GST (Goods and Services Tax) in 2017 and COVID-19 delayed this revision.
The previous GDP series of 2015, where the base year was revised to 2011-12, was an update fraught with controversies. In 2018, this debate intensified: the bone of contention was the new methodology, new datasets, and the revised figure of 8.6 percent growth in 2018 (instead of 8.3 percent).
This time, the revisions came after a decade, and the implications are big.
While the back series of GDP estimates (with base year 2022-23) since 1950-51 – each time the base year is revised, the entire series is recalculated – is scheduled to be released in December 2026, the comparisons between the old and the new series since 2022-23 have been presented by the government already this year.
According to the government, the total GDP estimates for India for 2022-23 have come down by 2.9 percent, and for 2023-24 and 2024-25, they have come down by 3.8 percent each in both years, which means that the GDP was previously overestimated.
The annual GDP growth rates were also revised from 9.2 percent to 7.2 percent for FY2023-24, and from 6.5 percent to 7.1 percent for FY2024-25.
When we consider spending in the economy, the situation appears more worrying – both household spending and investment in new assets and infrastructure slowed down in 2024-25.
This exercise focusing on changes in the methodology of estimating the GDP follows a downgrading of India’s national account statistics to a C grade – the second lowest grade – by the IMF in November 2025.
Such periodical revisions raise an important question – do these numbers simply end up as fancy graphs in newspapers and in power point presentations, or do they actually translate into a better economic understanding of human lives?
The main purpose behind this routine exercise is to achieve a higher accuracy in GDP estimation in the event of changing production conditions, consumption patterns and the macroeconomic structure.
Since the process of estimating the GDP of a country like India is a herculean exercise – requiring information of every single economic activity – this is achieved using approximations at different levels, which themselves are rooted in certain extrapolations and proxy markers.
For instance, the production of raw tea is estimated at 4.44 times the production of processed tea according to the data available from the Tea Board. Similarly, until the recent revision the gross value added in cable, recording, and broadcasting services was calculated on the basis of the share of population having television (from the Census data).
Over the years, the technique of producing tea might change – leading to a higher production of tea, for instance – or a more regular source of data on ownership of television might be developed. Changing economic conditions thus warrant a change in the methodology of estimation, made possible by the new administrative sources which can provide data at regular intervals.
This year too the exercise carries deeper connotations, which go beyond its statistical content. While GDP itself has gone from being a fashionable buzzword to being overstretched over the years, the term still matters, especially when it comes to informed policymaking. The recent methodological revisions are aimed at a more accurate estimation of the GDP, since they draw on updated information from regular surveys of the household sector-ASUSE (Annual Survey of Unincorporated Sector Enterprises) and PLFS (Periodic Labor Force Estimation Survey.
Additionally, the new series also uses a more disaggregated approach toward estimating sectoral contribution (of agriculture, industry and services) to the total production, lending more reliability to the numbers. This disaggregated approach is based on micro-level price indices for better assessment of changes in real economic activity, updated ratios (which are used as a proxy in the absence of precise information at regular intervals), double deflation in agriculture and manufacturing (to account for price changes in inputs and output separately), and the use of volume extrapolation.
These are likely to capture the changes in individual production activities under a single head, and minimize the errors involved in estimations using approximate ratios or indices at aggregate levels (see table below).
The hypothetical example in the above table is an illustration of how total output, when measured using a uniform index (110), can involve aggregation errors and misleading estimations (column 3), as compared to the case where a disaggregated price index (column 4) is used. Column 5 of the table displays these more accurate estimates. With a vast number of economic activities in reality, these discrepancies would most likely widen further.
The Ministry of Statistics and Program Implementation’s official statement on methodological improvements in compilation of GDP from the expenditure method details out the list of new price indices for individual items for estimating the private final consumption expenditure with more precision.
These changes carry useful information to identify and shape the economic trajectory of India. While the common people of the country may gloss over this number crunching, it is important to note that these changes foreground the contested relationship between the measurement and the governance of the economy. A more accurate measurement by itself may not lead to better governance unless accompanied by the relevant policy measures.
The statistical methodologies for estimating the GDP are, after all, akin to medical diagnostic tests. They may not tell us our cholesterol levels with precision, but they form the basis of actionable measures such as changes in lifestyle that would definitely improve our cholesterol levels, and consequently, our overall health status.
What remains to be seen – and what holds utmost importance for our everyday lives – is how these indicators are interpreted and translated into macroeconomic policymaking. It is through this translation that GDP is actually operationalized from being merely a statistical measure to a powerful instrument shaping employment, income, and well-being.
Originally published under Creative Commons by 360info™.
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