Does the new GDP series strengthen statistical credibility?

— Pushpendra Singh and Archana Singh
Amid rising global public debt and growing concerns over fiscal sustainability, macroeconomic indicators like the debt-to-GDP ratio offer critical assessment of economic stability.The Fiscal Health Index (FHI) 2026 released by NITI Aayognotes, citing the International Monetary Fund’s latest Fiscal Monitor, that global public debt is on track to approach 100 per cent of world GDP by the end of the decade, if current trends persist.

In this context, India’s revised GDP base year – from 2011-12 to 2022-23 – represents more than just a technical update.

It potentially reshapes the framework through which the country’s economic performance is measured andfiscal metrics are interpreted.

GDP isn’t just a quarterly headline.

It shapes fiscal ratios, influences monetary policy, and signals macroeconomic stability to both investors and citizens.

When the base year changes, the story of growth may also change with it.

India’s latest GDP estimates with base year 2022-23 reflect the evolving momentum of the economy.

Last month, the Ministry of Statistics and Programme Implementation(MoSPI) released three important sets of datathat offer acomprehensive overview of the country’s economic output.

First, it released its second advance estimate for FY 2025-26.

Under the revised base year, real GDP growth for FY 2025-26 is projected at 7.6 per cent, slightly higher than the 7.1 per cent recorded in FY 2024-25.

This shows that growth has remained stable even after the base year change.

Second, it released GDP numbers for the third quarter (Q3) of FY 2025-26 (October-December 2025).

Nominal GDP is projected to grow by 8.6 per cent this year.

In Q3 alone, real GDP is estimated at 84.54 lakh crore, representing a growth rate of 7.8 per cent.

Quarterly data shows that economic activity has remained strong throughout the year.

Third, MoSPI released a detailed note explaining the changes in the methodologyit has madein the new GDP series.

This note is as important as the numbers themselves, as it explains how growth is being measured differently under the new base year.

The base year is the year whose prices are used to calculate real GDPby removing the effect of inflation.Over time, however, economies change.

If an old base year is used for too long, the resulting comparison may be misleading.

India’s economy underwent a clear transformation between 2011-12 and 2022-23.

The introduction of theGoods and Services Tax in 2017 acceleratedthe formalisation of businesses.

Digital payment systems grew significantly, with theUnified Payments Interface (UPI) becoming the preferred mode of paymentacross categories for Indians.

Renewable energy capacity expanded rapidly.

These changes also led to a shift in thepatterns of production andconsumption.

Additionally, the pandemic years (2019-20 and 2020-21) disrupted output and demand, making them unsuitable referenceyears for economic measurement.

Hence, choosing 2022-23 as the new base year reflects a morestable, post-pandemic economy.

It allows GDP estimates to better capture new sectors andevolvingpatterns.

However, there is a caveat.

Growth rates calculated under the old base and the new base are not directly comparable.

Until a revised back series is released, public debate needs to avoid drawing long-term conclusionsfrom the new numberstoo quickly.

A major strength of the revised series is its expanded data sources.

Previously, GDP estimation often relied on extrapolations between surveys, especially for the informal and unincorporated sectors.

The new framework uses annual data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS).

For a country where informal enterprises provide a large share of employment, this is a meaningful improvement.

Now administrative data plays a bigger role.

GST data supports the allocation of private corporate output across states and feeds into quarterly estimation.

The Public Financial Management System (PFMS) provides more timely tracking of government expenditure.

Even vehicle registration from the e-Vahan portal is used to estimate consumption.

This shift fromproxy ratiosto high-frequency digital records strengthens the credibilityof GDP estimates.

However, it also raises questions.

Since administrative dataprimarilycaptures formal transactions, informal or cash-basedtransactions may remainunderrepresented.

As formalisation deepens, measured GDP may increase in part because economic activity is recorded more accurately, not necessarily because output itself has increased.Therefore, the distinction between real growth and improved statistical visibility remains central to the interpretation of the new data.

One of the least discussed but most important reforms is the expansion of the deflation framework.

Previously, GDP estimates relied on approximately 180 price indexes.

The revised series uses over 600 granular, item-level deflators.

Why does this matter?

Real GDP depends on the quality of deflation.

If the inflation measurement is not accurate, real growth will be distorted.

Instead of the larger Consumer Price Index (CPI) or Wholesale Price Index (WPI) aggregate, individual components now use specificsub-indices.

Vegetable prices deflate vegetable consumption.

Clothing prices deflate clothing expenditures.

Machinery uses machinery-specific indexes.

Construction uses input-level price data.

Thisaddressescross-sector distortions, where a sharp price rise in one sector could artificially alter real growth elsewhere.

This correction is technical, but its macro impact is significant.

It strengthens the credibility of real output numbers.

A long-standing challenge in national accounting has been the statistical difference between theproduction and expenditure approaches to GDP.The revised series integrates the Supply and Use Table (SUT) framework.Matching total supply (production plus imports) with total use (consumption, investment, and exports) at the product-level helps minimise discrepancies across datasets.This approach enhances internal consistency and transparency.

With nominal GDP projected to grow at 8.6 per cent in FY 2025-26,one important impactof the new GDP series will be on fiscal ratios.

Fiscal deficit-to-GDP and debt-to-GDP are ratios.

The deficit or debt is the numerator, while GDP is the denominator.

If the denominator becomes larger, because of rebasing or better measurement, the ratio automatically falls, even if the actual deficit or debt has not changed.

This is called the denominator effect.

Numerator –fiscal deficit (government borrowing in a year)Denominator –GDP (size of the economy)
Numerator –total public debtDenominator –GDP
Take a simple example.

Suppose government debt is 100 and GDP is 200.

The debt-to-GDP ratio is 50 per cent.

Now imagine GDP is revised upward to 220 because of better measurement, while debt remains 100.

The ratio falls to about 45 per cent, without the government repaying a single rupee.

On paper, the fiscal position looks stronger.

In reality, nothing has changed.

This is why statistical improvement should not be mistaken for fiscal consolidation.

Real consolidation comes from higher revenues, controlled spending, and lower borrowing, not from a larger denominator.

For markets and rating agencies, what matters is the trend in borrowing and the government’s ability to manage interest payments.

A lower ratio caused by rebasing does not change the sustainability question.

States will face similar adjustments once their Gross State Domestic Product (GSDP) aligns with the new base.

Borrowing limits linked to state GDP may shift mechanically.

For monetary policy, the implications are quieter but important.

More accurate real GDP helps the Reserve Bank of India to judge whether the economy is overheating or slowing.

Better data improves inflation assessment and interest-rate decisions.

The revised GDP series improves the way India measures its economy.

It tracks the informal sector more regularly through improved surveys.

It uses more detailed price data,so that inflation adjustments are more preciseand real growth is measured more carefully.

Further, the use of Supply and Use Tables helps address gaps between production and spending estimates.

Administrative systems like GST and PFMS provide more timely data.

Quarterly and annual members are also aligned better.

In simple terms, the measurement scale has become more accurate.

But a better scale doesn’t change the person standing on it.

GDP, however refined, still does not tell us who benefits from growth.

It doesn’t capture inequality, unpaid care work done at home, or the environmentalcost of production.

Nor does it guarantee that a 7 per cent growth rate today will create enough jobs tomorrow.

GDP measures how much an economy produces, but it doesn’t measure how fairly that production is shared.

The new series strengthens statistical credibility, but it doesn’t by itself answer the deeper question: is growth inclusive, sustainable, and employment-rich?

The rebasing GDP is not merely a statistical exercise but a reflection of structural changes in the economy.

Illustrate in view of recent GDP base year revision.

What are Supply and Use Tables (SUT)?

Explain their role in improving the accuracy and consistency of national income accounts.

How can GDP rebasing affect fiscal indicators such as the fiscal deficit-to-GDP ratio and debt-to-GDP ratio?

Explain the concept of the denominator effect.

How does the formalisation of the economy affect GDP measurement?

Explain the difference between actual economic growth and improved statistical visibility.

Despite high GDP growth, concerns about employment generation and inequality persist in India.

Examine the limitations of GDP growth as an indicator of inclusive development.

(Pushpendra Singh is an Assistant Professor of Economics at Somaiya Vidyavihar University,Mumbai, and Archana Singh is an Assistant Professor of Gender and Economics at the International Institute for Population Sciences,Mumbai.)
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