India Overhauls GDP Calculation After IMF's 'C' Grade

A Major Statistical Overhaul

India is set to implement a comprehensive overhaul of how it calculates its Gross Domestic Product (GDP), a move aimed at enhancing accuracy and reflecting the economy's structural shifts. The government announced that the new GDP series will adopt 2022-23 as the base year, replacing the long-standing 2011-12 benchmark. This revision, scheduled for release on February 27, 2026, follows persistent concerns from economists and a critical assessment by the International Monetary Fund (IMF).

The IMF's 'C' Rating and Its Implications

In November 2025, the IMF assigned a 'C' rating to India's national accounts statistics, signaling that the data provided had shortcomings that could hamper effective economic surveillance. While the IMF acknowledged that the statistics were 'broadly adequate,' the 'C' grade highlighted specific methodological weaknesses that have been a subject of debate for years. This rating, though not an accusation of data fabrication, pointed to issues with the precision and comparability of India's headline economic figures.

Key Weaknesses in the Old Methodology

The IMF's critique centered on several core issues. First, the 2011-12 base year was considered outdated, failing to capture significant economic changes like the rise of the digital economy, platform-based gig work, and the expansion of renewable energy. International best practice suggests updating the base year every five years to reflect structural transformations. Second, the methodology for deflating nominal GDP to arrive at real growth was flagged. India's reliance on the Wholesale Price Index (WPI) for many sectors, instead of more appropriate Producer Price Indices (PPI) or consumer price data, could distort real growth figures, especially during periods of low inflation.

Discrepancies and Data Gaps

Another major concern was the growing statistical discrepancy between GDP measured by the production approach and the expenditure approach. In a well-measured system, these two figures should align closely. However, in recent quarters, this gap has widened, leading to questions about the true drivers of growth. For instance, while headline real GDP for Q2 FY26 was reported at 8.2%, some economists calculated 'core GDP' (excluding discrepancies) at just over 4%. Furthermore, the lack of seasonally adjusted quarterly data made it difficult to distinguish genuine economic trends from temporary spikes caused by factors like monsoons or festivals.

How the New GDP Series Aims to Fix the Problems

The upcoming revision introduces several key improvements to address these shortcomings. The shift to the 2022-23 base year is the most significant change, intended to provide a more accurate snapshot of the current Indian economy. The new series will incorporate a wider range of data sources, including net Goods and Services Tax (GST) collections, filings from Limited Liability Partnerships (LLPs), and data from the annual survey of unincorporated enterprises. This is expected to provide a more robust measurement of the informal sector, which has been historically difficult to estimate accurately.

Capturing the Modern Economy

The overhaul will also improve the deflation process. The government has indicated it will move away from using a single deflator for manufacturing and agriculture, applying double deflation where feasible. This technique, which accounts for changes in both input and output prices, is considered more accurate. These changes aim to create a more realistic picture of economic activity, ensuring that sectors like the gig economy and digital services are more fully represented. According to officials, generating these new estimates requires at least five years of historical data to ensure stability and accuracy.

Market Impact and Future Outlook

Economists and market analysts are watching this transition closely. Aditi Nayar, Chief Economist at ICRA, noted that the new series could revise the overall size of the economy and quarterly growth rates for the fiscal years 2024 to 2026. Similarly, D.K. Srivastava of EY India suggested that with services likely receiving a higher weight in the new series, the average real GDP growth could appear higher. The release of back-series data, recalculated using the new methodology, will be critical for understanding how the perception of India's recent economic history might change. This revision is a crucial step toward bolstering the credibility of India's economic data and ensuring that policy decisions are based on the most accurate information available.