Amid ongoing crisis in West Asia, Indian economy likely to take a hit: World Bank says latest screenings suggest that the country’s GDP growth could fall to 6.6 percent this financial year.
The government’s own projections, published earlier this year, are more optimistic, however: GDP growth of 7.6 percent in the current financial year, following recent updates to how India measures economic growth. The update itself is the result of a revision of the base year for GDP calculation from 2011-12 to 2022-23, carried out by the Ministry of Statistics and Program Implementation.
A review like this is usually done once every five years, where a “normal“The year (without major shocks or unusual activities) is chosen as the new base year. For India, disruptions in economic activity due to the rollout of GST (goods and services tax) in 2017 and COVID-19 have delayed this revision.
The previous 2015 GDP series, whose base year was revised to 2011-2012, was an update fraught with pitfalls. controversies. In 2018, this debate intensified: the bone of contention was the new methodology, new data sets and the revised figure of 8.6% growth in 2018 (instead of 8.3%).
This time, the revisions came after a decade and the implications are far-reaching.
While the retrospective 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 expected to be released in December 2026, comparisons between the old and new series since 2022-23 have been presented by the government already this year.
According to the government, India’s total GDP estimates for 2022-23 declined by 2.9 percent, and for 2023-24 and 2024-25, they declined by 3.8 percent each in both years, meaning GDP was previously overestimated.
The annual GDP growth rates have also been revised from 9.2 per cent to 7.2 per cent for the financial year 2023-24, and from 6.5 per cent to 7.1 per cent for the financial year 2024-25.
Looking at economic spending, the situation looks more worrying: household spending and investment in new assets and infrastructure have slowed in 2024-25.
This exercise focused on changes in GDP estimation methodology follows a downgrading of India’s National Accounts Statistics to a C rating – the second lowest rating – by the IMF in November 2025.
Such periodic revisions raise an important question: Do these numbers simply end up as fancy graphs in newspapers and in PowerPoint presentations, or do they actually translate into a better economic understanding of human life?
The main objective of this routine exercise is to achieve greater accuracy in GDP estimation in the event of changes in production conditions, consumption patterns and macroeconomic structure.
Since the process of estimating the GDP of a country like India is a Herculean exercise – requiring information on every economic activity – this is done using approximations at different levels, themselves anchored in certain extrapolations and proxy markers.
For example, 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 of cable, recording and broadcasting services was calculated based on the share of the population with television (based on census data).
Over the years, tea production technique might change – leading for example to higher production of tea – or a more regular source of TV ownership data might be developed. Changing economic conditions therefore justify a change in estimation methodology, made possible by new administrative sources which can provide data at regular intervals.
This year again, the exercise has deeper connotations, which go beyond its statistical content. While GDP itself has gone from being a buzzword to being a too tense over the years, the term still has its importance, especially when it comes to informed policymaking. Recent methodological revisions aim for a more accurate estimation of GDP, as they rely on updated information from regular household sector surveys – ASUSE (Annual Unincorporated Sector Enterprise Survey) and PLFS (Periodic Labor Force Estimation Survey).
In addition, the new series also uses a more disaggregated approach to estimate the sectoral contribution (of agriculture, industry and services) to total output, thus lending more reliability to the figures. This disaggregated approach is based on micro-level price indices for better assessment of changes in real economic activity, discounted 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 changes in input and output prices separately), and the use of volume extrapolation.
These are likely to capture changes in individual production activities under a single heading and minimize errors involved in estimates by using approximate ratios or indices at aggregate levels (see table below).
The hypothetical example in the table above illustrates how total output, when measured using a uniform index (110), can involve aggregation errors and misleading estimates (column 3), compared to the case where a disaggregated price index (column 4) is used. Column 5 of the table displays these more precise estimates. With a large number of economic activities in reality, these gaps are likely to widen further.
The Ministry of Statistics and Program Implementation official statement on methodological improvements in the compilation of GDP using the expenditure method details the list of new price indices for individual elements allowing more precise estimation of private final consumption expenditure.
These changes contain useful information for identifying and shaping India’s economic trajectory. Even if the country’s population ignores these calculations, it is important to note that these changes bring to the forefront the controversial relationship between measurement and governance of the economy. More precise measurement cannot in itself lead to better governance if it is not accompanied by relevant policy measures.
Statistical methodologies for estimating GDP are, after all, akin to medical diagnostic tests. They may not tell us our cholesterol levels precisely, but they provide the basis for actionable steps such as lifestyle changes that would definitely improve our cholesterol levels and, therefore, our overall health.
What remains to be seen – and what is of utmost importance to our daily lives – is how these indicators will be interpreted and translated into macroeconomic policymaking. It is through this translation that GDP is truly operationalized, moving from the status of a simple statistical measure to that of a powerful instrument shaping employment, income and well-being.
Originally published under Creative Commons by 360infos™.