Along with the promise of superior mirroring of the country’s national income with enhanced data granularity, the new GDP series with 2022–23 as the base year has thrown up some surprises.

Under the new series released on February 27, the nominal GDP for the current financial year is estimated to come down by about ₹12 lakh crore. The first advance estimates for the national income for FY26, released on January 7, had pegged nominal GDP at ₹357.14 lakh crore, while the second advance estimates under the new series lowered it to ₹345.47 lakh crore for the fiscal. The 3.47% drop in the estimates of the size of the economy in the first GDP data set may have a ripple impact on fiscal deficit calculations and public expenditure plans for the financial year.

BofA Global Research said this was against expectations and that the nominal GDP base was more likely to be revised higher. “The downward revision will push the fiscal deficit and debt estimates modestly higher,” it said.

“The downward revision in nominal GDP from the government's budget estimate of ₹357.1 lakh crore could push the FY26 fiscal deficit to 4.5%, slightly higher than the earlier expectation of 4.4%,” CareEdge Chief Economist Rajani Sinha said.

Will lower nominal GDP affect fiscal consolidation?

In fact, the government has assured that even as the estimated fiscal deficit for the current financial year will now be 4.5%, other indicators such as the primary deficit, revenue deficit, effective capital expenditure, or the capex-to-GDP ratio will remain broadly unchanged.

“Fiscal consolidation is on track. In light of the 2022–23 base revision, and with nominal GDP being roughly lower by ₹12 lakh crore or so, the estimated fiscal deficit for 2025–26 will now be 4.5%,” said Chief Economic Advisor V. Anantha Nageswaran.

“But other indicators like the primary deficit, revenue deficit, effective capital expenditure, or the capex-to-GDP ratio will remain broadly unchanged. The GDP revision will not alter the fiscal trajectory of the Union government,” he added.

That said, there is a quantum jump in the estimates of real GDP for FY26 in the 2022–23 series compared with the estimates for the fiscal as per the old series (2011–12). Under the new series, real GDP, or GDP at constant prices, is estimated to reach ₹322.58 lakh crore in FY26. This is almost 50% higher than the nominal GDP level of ₹201.90 lakh crore estimated in the first advance estimates of the national income released in January.

What are the changes in the new GDP series?

This is where the entire effort that has gone into deepening data collection, methodological improvements, and capturing structural changes and the informal economy comes into play.

For example, proxy indicators were used earlier to estimate household sector growth. Under the new series, actual estimates are being used to measure changes more dynamically. The new series will also use GST data to cross-check estimates obtained from other data sources. Data from e-Vahan has also been used to estimate private final consumption expenditure related to road transport services.

The informal economy will also be captured in the new GDP series. The contribution of hired domestic workers (cooks, drivers, household cleaners, etc.) by households has been included in GDP estimation. Such activities are termed “activities of households as employers of domestic personnel,” and their contribution is included based on the number of such workers and their wages as available from the annual PLFS data. Under the new series, unincorporated small businesses, self-employed people, and informal economic work are also being captured.

The new series will also use double deflation for the accurate calculation of the real value of output. “Under this method, the effect of prices is removed separately for inputs and outputs, and therefore it gives a much clearer picture of real growth. In the new series, single deflation has been completely done away with. Deflators will be used at a more granular level, and over 300 item-level indices have been used in the new series of national accounts,” the ministry said in a note.

Going forward, the new series will make the country’s GDP calculations more granular and provide policymakers with a clearer view through improved micro-level data gathering.