Rebasing India’s GDP: A Necessary Update
Every economy evolves faster than the statistics used to describe it. With the rapid emergence of new products and industries, such as app-based services and digital payments, old economic models can become obsolete. India's decision to rebase GDP to 2022-23 from the earlier base year (2011-12) is a step to align national accounts with the current economic realities.
Reasons for Rebasing GDP
- Enhanced Data Utilization:
- The revised framework leverages richer administrative data, focusing on GST-linked information, modern digital records, rather than relying solely on infrequent surveys.
- Dynamic Measurement of Economy:
- More consistent incorporation of regular surveys and labor force data to better capture the evolving household and unincorporated sectors.
- Modernized Consumption Measurement:
- Adoption of the COICOP 2018 classification to reflect current household consumption, enhancing comparability and internal coherence.
- Improved Reconciliation Between Production and Expenditure:
- Integration of the “Supply and Use Tables” framework to reduce the gap between industry-level supply and consumption, investment, and trade.
Despite improvements, challenges remain in capturing economic activities perfectly due to data quality issues and compliance gaps.
Impact of the New GDP Series
- Stronger Real GDP Growth in FY25:
- The new framework provides a clearer separation of price effects from volume effects, particularly in manufacturing and services, leading to a more accurate depiction of real output.
- Refined Deflation Practices:
- Improved techniques reduce the risk of misinterpreting cost pressures as a slowdown in real activity.
- Better Reflection of Modern Services:
- Enhanced data use ensures growth measurement aligns with the actual expansion of activities in digital platforms, logistics, and financial intermediation.
The rebased GDP numbers, while more aligned with ground reality, still cannot capture lived experiences such as income distribution or job quality. The value of rebasing lies in providing a credible national accounts framework and clearer sector mapping, facilitating informed debates and policy decisions.
Disclaimer: These are personal views of the author and do not represent the opinion of the Business Standard newspaper.
