Rewriting Growth: What India’s GDP Rebase Could Change | Explained

The new series of gross domestic product (GDP) data, rebased to 2022–23, will be released on Friday with methodological and statistical upgrades aimed at better reflecting current macroeconomic trends and evolving consumption and investment patterns.

The revision seeks to make GDP and Gross Value Added (GVA) estimates more representative of the economy’s structure, addressing concerns raised by institutions such as the International Monetary Fund (IMF) over outdated base years and statistical gaps.

India’s past rebasing exercises show how such revisions can reshape perceptions of economic performance. Under the 2004–05 series, the country recorded three consecutive years of over 9% growth — 9.3% in FY06 and FY07, and 9.8% in FY08 — during the first Manmohan Singh government, an unprecedented stretch of near double-digit expansion. Growth later peaked at 10.3% in FY11 under UPA 2.0, only the second time India crossed the double-digit mark, after 10.2% in FY89 under the 1999–00 series.

However, when the base year was shifted to 2011–12, those headline numbers were revised downward. The three-year 9% run was recalibrated to 7.9%, 8.1%, and 7.7%, while FY11 growth was scaled back to 8.5%. Although still strong, the revision moderated the narrative of an economy consistently flirting with double-digit expansion.

As India prepares to rebase GDP to 2022–23, history suggests that the exercise could once again alter not just growth figures, but the broader story of the economy’s trajectory.

The Ministry of Statistics and Programme Implementation (MoSPI), in an effort to update and upgrade data collection and have more accurate economic indicators, has rebased the Consumer Price Index (CPI) and GDP, and the rebased series for the Index of Industrial Production (IIP) will be rolled out in May.

The CPI basket saw a rejig, with lesser weighting for food prices and incorporation of new services-based components, including digital subscriptions.

With the post-pandemic economy being led by services, the new series of GDP shall also give weighting to emerging industries such as digital services and renewable energy. The new series also includes the introduction of ‘double deflation’ across sectors with robust data and surveys for accurate measurement.

What is GDP?

GDP is the total value of all the goods and services produced inside a country in a given period of time. GDP is usually calculated either yearly or quarterly. The GDP data captures the health of the economy, with its most important measure being its ‘size.’ When GDP grows, it means the economy is expanding, with increased economic activities such as an increase in production by businesses, rising earnings, and people consuming more. On the other hand, when GDP growth falls, it indicates the economy is shrinking and economic activities are stalling.

How is GDP Measured?

Typically, GDP is measured in three different ways. The first is the production method, which adds the value added at every stage of production across industries. Second is the expenditure method, which adds up the total spending by households, businesses, the government, and net exports. And finally, the income method, through which everyone’s earnings from wages, rents, interest, and profits are calculated.

GDP data is often lagging, meaning it shows what happened in the past three months, and policymakers take into account other macro indicators such as the Purchasing Managers’ Index (PMI) to estimate the next GDP print.

Why Does GDP Matter?

GDP data provides a comprehensive estimate of various sectors’ contributions and progress in the economy in order for policymakers to craft fiscal and monetary policy accordingly to strengthen and maintain growth momentum.

When GDP is lagging, the government adopts an expansionary policy, increasing public spending on infrastructure or slashing taxes to put more disposable income in the hands of people to boost consumption.

Meanwhile, if the economy is rapidly growing, leading to unsustainable debt-to-GDP ratios, the government adopts a contractionary policy by cutting spending or raising taxes to slow demand.

On the monetary policy front, if GDP growth slows, the Reserve Bank of India reduces the benchmark lending rate, the repo rate, to make borrowing cheaper for businesses to invest and for consumers to buy homes or cars.

However, high growth can be accompanied by inflation. The central bank’s mandate is to maintain inflation at the target of 4% (with a +/- 2 tolerance band) while ensuring growth. In order to tame inflation, the RBI hikes the repo rate to slow down the pace of spending.

What Does the New Series Change?

A key component of the new series is the improved measurement of the household and informal sectors, which contribute significantly to employment and output. The new series adopts annual, survey-based level estimates using data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS).

Other upgrades include the incorporation of e-Vahan data for transport consumption and the Public Finance Management System for government spending. GST data will also be used to cross-check the estimates obtained from other data sources.

For multi-activity private corporations, the new series uses the MGT-7 and MGT-7A forms mandated by the Ministry of Corporate Affairs (MCA). There are also reports suggesting that the government is planning to include the Producer Price Index (PPI) in the near future.

What are the New Methodological Changes?

Two key changes are the use of double deflation and the supply and use table framework.

Double deflation is an accurate statistical method to calculate real GDP or GVA by separately adjusting both nominal output and intermediate input costs for inflation using specific price indices.

The method is considered particularly important in sectors where input costs and output prices move at different rates, such as manufacturing and services with complex supply chains. By capturing these divergent price movements, double deflation reduces distortions associated with single deflation methods and provides a more reliable picture of sector-wise and overall economic growth.

For instance, in the old system, if the price of a car went up, we sometimes assumed the "value added" grew by the same amount. With double deflation, we separately adjust the price of the inputs (like steel and rubber) and the final car for inflation. This prevents "fake" growth figures when raw material prices are volatile.

The supply and use table framework describes how products are brought into an economy and how those same products are used for intermediate consumption or as final consumption by households, non-profit institutions serving households, governments, or as gross capital formation or exports. The framework integrates all the components of the production, income, and expenditure approaches to measuring GDP.

 For policymakers and markets alike, the rebased series will offer a more contemporary and statistically robust snapshot of India’s economy. But as past revisions have shown, the exercise is not merely technical — it has the potential to reshape how India’s growth story is understood, both domestically and globally.