Recently, Saurabh Garg, Secretary to Government of India in the Ministry of Statistics and Programme Implementation, stated that the ministry is in the process of revising the “base year” for the calculation of Gross Domestic Product (GDP).

What is GDP Base Year Revision?

• GDP (Gross Domestic Product): Measures the total value of goods and services produced in a country in a given period.
• Base Year: A reference year used for GDP calculations to compare economic growth over time.
• Base Year Revision: The government periodically revises the base year to reflect changes in the economy’s structure and composition.
• Current Base Year: 2011-12 (last revised in 2015).
• Proposed New Base Year: 2022-23 (to be released on Feb 27, 2026).
• First Estimates: The first official GDP estimates were based on 1948-49 as the base year.
  • Published in 1956 under the Central Statistical Organisation (CSO).

Role of Base Year in GDP Calculation

• Price Index: The base year’s prices are used to create a price index, such as the GDP deflator.
• GDP Deflator: A measure of the overall price level of all final goods and services produced in an economy.
  • Calculation: (Nominal GDP / Real GDP) x 100
• Real GDP Calculation: Real GDP = Nominal GDP / GDP Deflator
• Recent Base Year: India’s current base year for GDP calculation is 2011-12.

Why Revise GDP Base Year & Methodology?

• Reflect Structural Changes: Captures new industries (e.g., digital economy) and removes outdated ones.
• Improve Accuracy: Updates data sources (e.g., GSTN, UPI transactions, MCA-21 database).
• Inflation Adjustment: Provides a clearer picture of “real” economic growth by removing price effects.
• Global Standards: Aligns with international best practices (e.g., UN System of National Accounts).

Historical Context of Revisions in India

• First GDP estimates: 1949 (PC Mahalanobis Committee).
• Seven revisions so far (latest in 2015, shifting base to 2011-12).
  • From 1948-49 to 1960-61 in August 1967;
  • From 1960-61 to 1970-71 in January 1978;
  • From 1970-71 to 1980-81 in February 1988;
  • From 1980-81 to 1993-94 in February 1999;
  • From 1993-94 to 1999-2000 in January 2006;
  • From 1999-2000 to 2004-05 in January 2010; and
  • From 2004-05 to 2011-12 on January 30, 2015.
• Earlier revisions occurred every 10 years, but since 1999, they happen every 5 years (as per National Statistical Commission recommendations).

Why is the 2026 Revision Crucial for India?

• Credibility Concerns: 2015 revision faced criticism (e.g., Arvind Subramanian argued GDP was overstated).
  • Discrepancies between MCA-21 corporate data and ASI (Annual Survey of Industries) raised doubts.
• Global Standing: India is set to become the 3rd largest economy (after US & China).
  • Investors & analysts will scrutinize data for accuracy.
• Policy Implications: Accurate GDP data is vital for fiscal, monetary, and social welfare policies.

Other Key Revisions Alongside GDP

• IIP (Index of Industrial Production): Base year shifting to 2022-23 (from 2011-12).
• CPI (Consumer Price Index):
• • New base year: 2023-24 (based on Household Consumption Survey 2023-24).
  • Changes in basket: May include online services (OTT, airfare), exclude govt-provided housing.
  • PDS Items: Methodology under discussion for inclusion in inflation calculation.

Improvements in Data Collection

• New Data Sources: GSTN, e-commerce, UPI transactions, and administrative records (e.g., IRCTC for rail fares).
• Surveys Added: 
  • Annual Survey of Service Sector (ASSSE) – Uses GSTN data (pilot done, full survey from Jan 2026).
  • Forward-Looking Private Capex Survey (low response rate; improving outreach).
  • Health, Tourism & Household Travel Surveys (launched in 2025).
• PLFS (Periodic Labour Force Survey): Now monthly estimates (earlier only quarterly for urban areas).
  • New questions on education, land ownership, remittances for better labor market analysis.

Key Challenges in GDP Base Year Revision

• Informal Sector Underreporting: Nearly 80% of employment is informal, but data is patchy (e.g., street vendors, small workshops).
  • Surveys like PLFS and CES face low response rates.
• Corporate Data (MCA-21) vs. Ground Reality: MCA-21 database may overstate profits of large firms, missing smaller enterprises.
• Debate Over GDP Overestimation: Critics argue 2015 revision inflated growth by changing deflators.
• • Similar risks if new sectors (e.g., digital economy) are improperly weighted.
• Back Series Complications: Revising past GDP data to align with the new series is technically challenging (e.g., 2015 back series faced criticism).
• • Disrupts long-term trend analysis (e.g., pre- vs. post-2014 growth rates).
• Credibility at Stake: If India’s GDP growth is seen as “statistically inflated”, FDI and ratings may suffer (e.g., China’s credibility issues).
• • Example: Argentina’s 2023 GDP revision exposed a smaller-than-claimed economy, triggering market panic.

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