GDP base year reset: Are India’s data quality concerns finally being addressed?

In the intervening period, concerns have been raised about certain aspects of India’s national accounts—especially the measurement of the informal sector, the use of deflators to calculate real growth, statistical discrepancies between different GDP estimates, reliance on fixed corporate ratios, and gaps in price indices such as the absence of a producer price index (PPI).

In its recent data quality assessment, the International Monetary Fund (IMF) highlighted areas where India’s methods could be strengthened to make the estimates more robust and better aligned with global standards.

With the shift to the 2022-23 base year, the key question is: how far does the new series address these concerns? Here’s a quick breakdown:

Why is the base year being revised after 10 years?

Base year revisions are ideally carried out every five years so that GDP reflects changes in the structure of the economy. The current base year, 2011-12, was introduced in January 2015, but the next revision was delayed.

One reason was that the Household Consumption Expenditure Survey (HCES) 2017-18 was not used due to data quality concerns. Soon after, the covid-19 pandemic disrupted surveys and fieldwork, pushing back fresh data collection.

Once conditions normalized, two back-to-back HCES rounds were conducted in 2022-23 and 2023-24. At the same time, newer datasets—such as detailed MCA-21 corporate filings, the Annual Survey of Unincorporated Sector Enterprises (ASUSE), and the Periodic Labour Force Survey (PLFS)—became available and were reviewed for use in the revised series.

Why was 2022-23 chosen as the revised base year?

The year 2022-23 has been chosen as the new base year because it is seen as a stable and normal economic year. The economy did not experience a low base effect in that year, meaning growth was not unusually high simply because of a weak previous year.

Another important reason is data availability. The results of major surveys—such as the HCES, the ASUSE, and the PLFS—were available for 2022-23. Having these large and updated datasets for the same year made it easier to build a consistent and reliable benchmark.

How is the new series trying to fix informal sector measurement?

One of the biggest concerns has been on how India measures its vast informal or unincorporated sector.

Earlier estimates relied on older surveys and the Effective Labour Input (ELI) method, which assigned different productivity weights to different types of workers.

In the new series, the method shifts to a simpler Labour Input (LI) approach. Gross value added (GVA) per worker will be derived from the ASUSE data, while worker numbers will come from PLFS, after adjusting for projected population.

The shift to ASUSE-based productivity and updated labour data directly addresses concerns that informal sector estimates were based on outdated benchmarks.

What about discrepancies in GDP estimates?

GDP can be measured through production, income and expenditure approaches. Differences between these methods show up as statistical discrepancies.

The new methodology places strong emphasis on improved classification, better mapping of corporate accounts, updated informal sector benchmarks, and refined institutional sector coverage.

The expectation is that these improvements will reduce internal inconsistencies over time. However, discrepancies are not eliminated by a single reform. They depend on the quality of both production-side and expenditure-side data, which are being refined but not fundamentally redesigned.

Is double deflation finally being adopted across all sectors?

Double deflation has been one of the most debated issues in India’s GDP methodology.

In the 2011-12 series, the single deflation method is used for most sectors, except agriculture and mining and quarrying, which use double deflation. The limitation is that single deflation does not separately adjust for changes in input costs and output prices, potentially distorting real growth estimates.

Economists and the IMF have recommended wider use of double deflation, which adjusts output and intermediate consumption separately using relevant price indices, and then derives real value added.

In the new 2022-23 base year series, double deflation is being extended to various industries within the manufacturing sector. However, it is not being adopted across all sectors. Where data constraints remain, volume extrapolation or single extrapolation methods will continue.

So, while manufacturing sees a clear shift, the economy as a whole does not fully move to double deflation yet.

What about price indices like WPI and PPI?

One long-standing issue has been the reliance on the wholesale price index (WPI) as a proxy deflator in some areas, and the absence of a PPI.

Even as GDP shifts to a new base year of 2022-23, the WPI continues to use 2011-12 as its base. This creates a gap between the price structure used to measure inflation and the updated structure reflected in GDP.

The statistics ministry recently revised the base to measure consumer price index (CPI), improving consistency on the consumption side. However, WPI remains unrevised.

As for the PPI, it is often seen as a more suitable measure of producer-level inflation. However, building a comprehensive PPI requires extensive and stable price data across sectors. In the current revision, a full-fledged PPI is not being introduced. Instead, improvements are being made within the existing price index framework.

How is the government planning to plug data gaps using GST, Vahan and other digital portals?

In the earlier series, some sectors—especially household and informal sectors—were estimated using older survey benchmarks and then updated through growth rates or proxy indicators.

In some cases, formal sector trends were used to approximate informal activity because detailed, regular data were limited.

In the new series, the government is using more administrative and digital data to reduce such gaps. The use of GST data will help identify active businesses and track sector-wise activity, including smaller firms beyond incorporated companies.

MCA-21 filings, especially MGT-7 returns, will provide clearer information on what companies actually do. The e-Vahan portal will be used to estimate vehicle stock and household spending on transport, fuel and maintenance. Other systems such as the Public Financial Management System (PFMS) and additional administrative databases will also be used to support and verify estimates.

Will the new series fully address the IMF’s concerns?

The 2022-23 base year revision tackles several major issues: outdated informal sector benchmarks, rigid corporate ratios, weak industry classification, and gaps in institutional coverage. It also strengthens the use of administrative data and clarifies constant price procedures in financial services.

However, not all structural concerns are being fully resolved. Double deflation is not being uniformly implemented, and a PPI is still absent. Improvements in discrepancies will depend on how production and expenditure data evolve over time.

In short, the revision represents a significant upgrade in methods and data use. But like any statistical system, it remains a work in progress.