Fortune India Explainer: How India's new GDP series promises to monitor structural shifts, informal economy better

The ministry of statistics and programme implementation has rolled out the new gross domestic product series, moving the base year to 2022-23 from 2011-12.

It has also published fresh annual and quarterly GDP estimates for the period between 2022-23 and 2025-26 under the revised framework. Indian economy witnessed GDP growth of 7.8% in the third quarter of the current financial year, compared with 7.4% in the same quarter of the previous financial year, according to the data released by the government on Friday.

Under the new series, GDP growth for FY26 is pegged at 7.6% against 7.4% estimated in the first advance estimates released on January 7. 

What does the base revision entail?

GDP captures the total value of goods and services produced in the economy over a given period. It guides monetary policy, budget planning, corporate strategy and even global investor sentiment.

But an economy keeps evolving over a period of time. Over the past decade, India has seen the rollout of the goods and services tax, rapid digitisation, formalisation of enterprises, changes in consumption patterns, and new data systems. If growth is measured against an outdated base year, the picture can become distorted.

The government aims to update the base year roughly every five years. However, 2017-18 was skipped because it coincided with the introduction of GST, which disrupted data comparability. The years 2019-20 and 2020-21 were heavily affected by the pandemic, and 2021-22 saw a sharp rebound. That made 2022-23 a more stable and representative benchmark.

What is different this time

The revised series draws on a wider and more granular data pool to better reflect today’s economy. Key additions include:

• GST data to estimate state-level output of private companies

• e-Vahan data to assess transport-related activity

• The Public Finance Management System for more accurate tracking of government spending

• The Annual Survey of Unincorporated Sector Enterprises and the Periodic Labour Force Survey to better capture household and informal sector activity

A major technical improvement is the integration of supply and use tables. These tables reconcile what is produced in the economy with how it is consumed, invested or exported. The idea is simple: total supply must match total use. This reduces the gap that often appears between GDP measured from the production side and from the expenditure side.

More precise measurement of corporate activity

Earlier, a company’s output was often assigned to a sector based on its principal line of business. The new approach uses activity-wise turnover data, allowing value addition to be mapped more accurately across sectors.

For diversified firms, this matters. A conglomerate that earns from manufacturing, services and trading will now see its contribution distributed more precisely rather than being clubbed under a single dominant activity.

Shift to double deflation

One of the most significant methodological changes is the move away from “single deflation”.

In simple terms, deflation adjusts nominal values for price changes to arrive at real growth. Under single deflation, value added was adjusted using a single price index. Now, the system adopts double deflation for manufacturing and agriculture. This means both output and input values are deflated separately, giving a clearer estimate of real value addition.

The new framework also uses more detailed price indices, drawing from over 260 Consumer Price Index categories instead of relying on broad aggregates. This should reduce distortions in real growth calculations.

Improved quarterly estimates

Quarterly GDP will now be compiled using the proportional Denton method, replacing the earlier pro rata benchmarking approach. The previous method sometimes created artificial jumps between quarters. The Denton method smooths the data while keeping it aligned with annual benchmarks, making quarter-on-quarter comparisons more reliable.

Expanded GST data will support these quarterly estimates. The financial sector will also be measured using the FISIM approach, which estimates the value of financial intermediation services indirectly through interest rate spreads. This aligns India’s practices more closely with global standards.

What comes next

The ministry plans to release back series data under the new method by December, which will allow analysts to compare longer-term trends on a consistent basis. A detailed methodology note is also expected in the coming months.

India currently compiles its national accounts in line with the System of National Accounts 2008. The global statistical community is moving towards SNA 2025, with countries expected to adopt it around 2029-30. India has indicated it will align with the updated standard in the next revision cycle.