New GDP Series to Rely on Enhanced Deflators, Reducing Risk of Distortion

Indian GDP Revision: New Series to Improve Precision

The upcoming GDP revision is expected to address concerns about the accuracy of growth calculations by relying on more granular, product-level deflators. The new series, which will revise the base year to 2022-23, will utilize nearly 600 item-wise deflators, a significant increase from around 180 in the earlier series.

The use of more detailed deflators is expected to improve the precision of real growth estimates by reducing dependence on broader price indices. The Statistics Secretary, Saurabh Garg, emphasized that the methodology for collecting prices at the item level remains consistent, minimizing the risk of distortion.

The new series also includes a significant methodological upgrade in the measurement of the household sector, which has historically been a debated component of India's GDP. To address discrepancies between GDP measured under production and expenditure approaches, the new series will integrate the Supply-Use Table (SUT) framework with national accounts.

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The integration of SUT with the National Accounts Framework is expected to help minimize discrepancies in the new series. This approach balances what industries produce with how goods and services are used in the economy, ensuring total supply matches total demand.

Frequency of Base Revisions

The Statistics Secretary also mentioned that India is expected to align with the international practice of revising GDP bases roughly every five years, subject to unforeseen circumstances. This is in line with the international norm and is expected to provide a more stable and consistent framework for GDP calculations.