IMF Backs India's GDP Data Reforms: What Has Changed In How India Measures Growth?

Amid the ongoing debate over the credibility of India's latest GDP estimates, the IMF has welcomed the country's efforts to modernise its statistical framework, saying the incorporation of a new Index of Industrial Production (IIP) and Producer Price Index (PPI) series should help improve the accuracy of GDP estimates.

This comes as a political row broke out over the better than expected GDP growth figures – 7.8 per cent for the June quarter – released by the government which were contested by former Finance Secretary S C Garg.

What Has Changed In India's GDP Calculation?

“The latest GDP release that we just talked about incorporated both a new index of industrial production, and a new producer price index series, and those two new series should help improve India's GDP estimates,” Julie Kozack, Director of the Communications Department, IMF, said in response to a question from PTI. She said the IMF welcomes these important steps that India is taking to modernise its macroeconomic statistics.

“We, of course, encourage the authorities to continue to further strengthen the statistical framework and data quality along the lines that they're progressing,” Kozack said at the monthly briefing in Washington DC.

She said India's real GDP in the second quarter grew by 7.8 per cent which was above the IMF's staff expectations, and also the consensus among other observers.

“This upward surprise was driven by stronger-than-expected activity in the services sector, and also in exports,” Kozack said, as quoted by PTI.

“I think what we would say is the outcome also underscores the resilience of the Indian economy, despite the energy price shock. And it also means that, as we've been saying for quite some time, that India does remain a key growth engine for the world,” the IMF official said.

Why Did The IMF Raise Concerns About India's GDP Data?

IMF had previously given India's national accounts a 'C' rating. Concerns included methodology and data-quality shortcomings. The reforms are intended to improve accuracy and international comparability But the IMF still sees scope for further improvement in data quality.

Garg had also claimed the GDP data was artificially boosted by compressing the previous year’s figures.

Garg claimed that the current prices GDP last year was Rs 86 lakh crore, which was revised down to Rs 80 lakh crore, and that had that not been done GDP growth would have been only 2.6 per cent.

The former finance secretary’s claims were latched on by the opposition parties, who questioned the integrity of the government’s GDP data.

Chief Economic Advisor V Anantha Nageshwaran termed Garg’s approach as “cherry-picking” of data.

He said the latest GDP figures were compiled using the financial year ending in March 2023 as the new base, and a change in methodology led to revisions to last year’s quarterly data.