A revision of GDP and its implications

The National Statistical Office released a new GDP series with 2022-23 as the base year after an 11-year gap, amid public questioning of the veracity of the 2011-12 series. The revised estimates show GDP size declining by about 3-4%, with sectoral composition changing slightly — higher shares for agriculture and industry and a decline in the services sector share.

Annual gross domestic product (GDP) is the sum of the final value of all goods and services produced during a year, net of material inputs. It is the most widely used measure of a country’s economic size. GDP, or the economy’s gross value added (GVA), is an estimate prepared using a wide range of data on physical outputs and their prices, and this involves numerous statistical procedures. The estimates broadly follow the global templates of the UN System of National Accounts (UNSNA). The latest revision, with base year 2022-23, follows its 2025 edition.

Roughly every five to ten years, the base year for National Accounts Statistics (NAS) is revised. This includes GDP estimates and other aggregates such as national savings, consumption, and investment.

The revision accounts for changes in what an economy produces and its prices. As the economy expands, the mix of goods and services produced — and their prices — changes. These shifts affect the “real size” of the economy, that is, excluding price rise. Revising the NAS is therefore a complex and massive task, undertaken periodically by the National Statistical Office (NSO) of every country.

This time, the release of the revised NAS was eagerly awaited as it was being issued after 11 years. The previous revision, with the base year 2011-12 and released in 2015, had prompted many data users — both official and independent analysts — to question the veracity of the GDP estimates.

For some sectors, such as manufacturing, the annual growth rates in the 2011-12 base-year series (when compared with earlier estimates) were not only higher, but the direction of change was also different.

The economic structure reported in the 2011-12 base year series also looked quite different from earlier structures. For example, the size of the non-financial private corporate sector (PCS) estimated in the 2011-12 series was much bigger than reported previously. Many experts have repeatedly shown that the official GDP growth rates based on the 2011-12 series during the last decade or so are distinctly overestimated. More recently, the International Monetary Fund (IMF), in its review of the quality of economic statistics of its member countries, awarded India a ‘C’ grade for the quality of its NAS, much to the country’s embarrassment.