India’s GDP/GVA data are now being re-estimated with respect to a new base year — 2022-23 — replacing the earlier base year of 2011-12. The new series better reflects structural changes in the economy as it assigns higher weights to those sectors which have grown faster and have increased their relative share in the overall GDP or GVA, writes DK Srivastava
l Rationale for the new GDP series
FOR CAPTURING THE activities of the informal sector and companies not reporting to the ministry of corporate affairs, various rates and ratios have been used in the 2011-12 series. Additional data sources are now being used in the new series which will make gross domestic product (GDP)/gross value added (GVA) numbers more reliable. An important additional data source is the GST database which would facilitate better compilation of quarterly GDP/GVA series and state-level GSDP series.
The method for estimating quarterly data has been upgraded to better reflect international practices so that quarterly and annual data are better integrated and some of the sharp discontinuities of the quarterly data are smoothened out.
l The double deflation method
THE DOUBLE DEFLATION method involves using different deflators for output vis-à-vis intermediate goods. This has been applied for sectors where detailed data for outputs and inputs are available. This change may lead to a higher real growth for GVA compared to that in the earlier series. This is conditional upon inflation of final outputs being higher than that of inputs. In recent times, WPI has been relatively lower as compared to CPI inflation. The WPI or input prices are generally sensitive to price movement of global commodities, particularly crude and metals.
l Impact on GDP numbers for FY26
AS PER THE new GDP series, FY2025-26 real GDP growth has been hiked to 7.6% (second advance estimates) in the 2022-23 base series as compared to 7.4% (first advance estimates) in the 2011-12 series. Real GVA growth for FY2025-26 stands at 7.7% in the new base series as compared to 7.3% in the old series. The main reason for this is an increase in the growth of manufacturing to 11.5% in the new series as compared to 7.0% in the old series in FY2025-26.
l Key sectoral growth swings
THE SHARE OF agriculture in real terms has risen to 17.7% in the new series against 13.8% in the old series. For industry, it has fallen to 29.7% from 30.3% and for services to 52.6% from 55.8%. Within services, the share of financial, real estate, IT, professional services and ownership of dwelling sector has increased to 26.1% in the new series from 24.4% in the old series.
There is a change in the share of private and government final consumption expenditures (PFCE and GFCE) in aggregate GDP. The share of PFCE in both real and nominal terms has marginally fallen and that of GFCE has risen. Again, earlier, real gross fixed capital formation (GFCF) was typically higher than the nominal GFCF by about 4% points. In the new series, this difference has come down sharply with the share of real GFCF at 32.0% and nominal GFCF at 31.7%.
Considering three-year average GFCF/GDP ratio of 32.2% over the period FY24 to FY26 and real GDP growth of 7.3% in the same period, the incremental capital output ratio in the new series comes out to be 4.4%. This is comparable to the ICOR of the 2011-12 base series.
l Why nominal GDP levels have fallen
NOMINAL GDP LEVELS utilise output prices, or output prices in combination with prices of intermediates as per the double deflation method. The output prices indicated by movements in CPI have been relatively lower in recent quarters. CPI data have also been revised to a new base year of 2024. These factors have affected the nominal magnitudes of GDP although the implications may differ across sectors. The new GDP series has reduced nominal magnitudes of national income aggregates. Nominal growth is estimated at 11.0% in FY24, 9.7% in FY25, and 8.6% in FY26. These may be compared with corresponding growth rates of 12.0%, 9.8% and 8.0% in the respective years as per the old series. Thus, the volatility in the nominal growth series has come down marginally in the new series.
The share of consumption expenditure is quite high in GDP averaging about 67%. Average growth in consumption expenditure (6.1% over FY23 to FY26) thus drives overall GDP growth, though it can be supplemented by investment growth which has a lower share but has shown a slightly higher growth on average of 7.1% in the corresponding period.
l Are there other inadequacies?
WITH THE REVISION of the base year to 2022-23 and the corresponding revisions in the methodology, India’s GDP/GVA compilation matches IMF GDP compilation norms as detailed in 2008. However, national income compilation norms have again been revised in 2025. These are now being adopted by most multilateral agencies. India is likely to adopt it once the 2022-23 series is revised to a new base year after five years, that is, for 2027-28 which should be available by 2030-31.