Context of the News

The Ministry of Statistics and Programme Implementation (MoSPI) has released a new GDP series with base year 2022-23, replacing the earlier 2011-12 base year, aiming to provide a more accurate picture of the economy.

Background

GDP estimates are periodically revised to reflect structural changes in the economy. India shifted base years earlier in 2004-05 and 2011-12. This is relevant for GS Paper III (Economy – National Income).

News Breakdown

What is GDP and Base Year?

Gross Domestic Product (GDP): Total value of goods and services produced within a country. Base Year: A reference year used to calculate real growth by removing inflation effects.

Key Highlights of New GDP Series

• GDP size at current prices:
  • ₹261.18 lakh crore (2022-23)
  • ₹289.84 lakh crore (2023-24)
  • ₹318.07 lakh crore (2024-25)
• Estimates are 3–4% lower than previous series
• Sectoral share in GVA (2024-25):
  • Primary: 21.4%
  • Secondary: 25.8%
  • Tertiary: 52.9%
• Manufacturing growth:
  • 12.7% (2023-24)
  • 9.3% (2024-25)
• Private consumption share:
  • Around 56% of GDP

Major Methodological Improvements

• Better classification of companies:
  • GVA distributed across multiple activities (earlier assigned to one activity)
• Improved corporate data usage:
  • Use of MCA database and scaling for non-reporting firms
• Inclusion of LLPs:
  • Enhances coverage of corporate sector
• Improved Household Sector estimation:
  • Uses PLFS (employment data) + ASUSE (enterprise data)
• Use of Double Deflation Method:
  • More accurate real GVA estimation
• Better consumption estimates:
  • Based on Household Consumption Expenditure Survey (HCES 2022-23)

Key Challenges Identified

1. State-wise GDP Estimation Issues

• Corporate data available only at national level
• Difficulty in allocating GVA to States
• Existing reliance on:
  • ASI (Annual Survey of Industries) – limited coverage
• Need to integrate:
  • GST + MCA databases

2. Data Gaps in Manufacturing Sector

• ASI covers fewer firms than actual:
  • Leads to distorted State GDP estimates

3. Volatility in Household Sector Data

• GVA per worker (GVAPW) shows fluctuations:
  • Example:
    • Rubber/plastic sector: ₹1.63 lakh → ₹2.55 lakh → ₹2.01 lakh
• Bihar manufacturing shows similar inconsistency

4. Suggested Solutions

• Use of 3-year moving average
• Introduce rotating panel surveys (like PLFS)
• Improve survey design and sampling

Prelims Focus

• GDP vs GVA:
  • GDP = GVA + Taxes – Subsidies
• Double Deflation:
  • Adjusting both output and input for inflation
• PLFS:
  • Employment-unemployment survey by NSO
• ASI:
  • Covers registered manufacturing sector
• HCES:
  • Measures household consumption patterns

Conclusion / Way Forward

The new GDP series improves accuracy, but better data integration, survey design, and state-level estimation methods are essential for reliable economic measurement.

Prelims Check

Question 1

Consider the following statements:

1. GDP base year revision helps improve accuracy of economic estimates.
2. Double deflation adjusts only output prices for inflation.
3. GVA includes subsidies but excludes taxes.
   Which of the statements given above is/are correct?
   (a) 1 only
   (b) 1 and 3 only
   (c) 2 and 3 only
   (d) 1, 2 and 3

Question 2

With reference to Indian economic data sources, consider the following:

1. PLFS provides employment data.
2. ASI covers unorganised sector enterprises.
3. HCES measures consumption expenditure.
   Which of the statements given above is/are correct?
   (a) 1 and 3 only
   (b) 2 only
   (c) 1, 2 and 3
   (d) 1 only

Question 3

Consider the following statements:
Statement-I: New GDP series uses MCA and GST data for better estimates.
Statement-II: State-wise GDP estimation is easier due to enterprise-level data availability.
Which one of the following is correct?
(a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
(b) Both Statement-I and Statement-II are correct but Statement-II does not explain Statement-I
(c) Statement-I is correct, but Statement-II is incorrect
(d) Statement-I is incorrect, but Statement-II is correct

Answers with Explanation

Q1: (a) 1 only

• Base year improves accuracy → Correct
• Double deflation uses both input and output → Statement 2 incorrect
• GVA excludes taxes, includes subsidies → Statement 3 incorrect
  Q2: (a) 1 and 3 only
• PLFS → employment → Correct
• ASI covers organised manufacturing → Statement 2 incorrect
• HCES → consumption → Correct
  Q3: (c) Statement-I correct, Statement-II incorrect
• New data sources used → Correct
• State-level allocation still difficult → Incorrect
  “Good data is the foundation of good policy.”