India Overhauls National Accounts with New 2022-23 Base Year
The Ministry of Statistics and Programme Implementation has unveiled a comprehensive revision of India's national accounts, establishing 2022-23 as the new base year. This significant update replaces the previous 2011-12 series, marking a crucial step in modernizing economic measurement to reflect the country's evolving economic landscape.
Understanding the Base Year Revision
A base year serves as a fixed reference point for measuring changes in prices, quantities, and other economic indicators over time. By adjusting nominal values to real values, it effectively removes inflation's distorting effects, enabling accurate year-on-year growth comparisons. Periodic revisions are essential to ensure the base year accurately mirrors the current economic structure, accounting for shifts in relative prices and output composition. Without such updates, the parameters used in calculations become outdated, rendering interyear comparisons meaningless.
Key Macro-Economic Indicators Updated
The statistics ministry has already refreshed the base year for the Consumer Price Index (CPI), which measures retail inflation, moving it from 2012 to 2024. The Gross Domestic Product (GDP), a primary gauge of economic size, is now based on FY2022-23 instead of FY2011-12. Additionally, the Index of Industrial Production (IIP), tracking industrial activity, will adopt the FY2022-23 base year starting May 28.
Major Changes in the New GDP Series
The new GDP series represents a paradigm shift from proxy-based estimation to direct-data integration, leveraging numerous alternative data sources. Previously, Private Final Consumption Expenditure (PFCE), a key demand measure, was calculated as a ratio of household versus business product allocation. The updated series will compute demand directly using the consumption expenditure survey.
To better track the vast informal sector, the old series relied on the labour input method. The new approach utilizes data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and Periodic Labour Force Survey (PLFS) to assess output and productivity more accurately.
Recognizing structural economic shifts, the new series enhances coverage of emerging sectors like the digital economy—including e-commerce, fintech, and gig work—and renewable energy, which were minimally represented in the old series.
New and Alternative Data Sources
The revision incorporates high-frequency administrative data, such as:
- GSTN data for state-level Gross Value Added (GVA) allocation, corporate activity cross-verification, and as a high-frequency indicator for trade and services.
- MCA-21 (Version 3), the advanced system for corporate and LLP filings, to measure the private corporate sector.
- e-Vahan data for real-time vehicle registration to estimate road transport services and consumption.
- FASTag Data as a proxy for commercial road traffic and logistics activity.
- Public Financial Management System (PFMS) for direct tracking of government expenditure at central and state levels.
- ESIC/EPFO payroll data to monitor formal employment and wages.
Data from household and enterprise surveys includes:
- Household Consumption Expenditure Survey 2022-2023.
- All-India Debt and Investment Survey 2019 for calculating interest rates and capital formation in the unincorporated sector.
- Periodic Labour Force Survey (PLFS) for annual and quarterly labour market data to refine income-approach estimates.
- Annual Survey of Unincorporated Sector Enterprises (ASUSE) to directly measure the GVA of small businesses and MSMEs.
Evolution of the GDP Deflator
Unlike the CPI, which tracks only household consumption prices, the GDP deflator monitors the price of all domestically produced goods and services, including machinery, construction, and government services. It is used to convert nominal GDP into real GDP.
The new series introduces a double deflator, separately adjusting output and input values to calculate real value-added. This method helps prevent distortions from volatile raw material prices, such as oil or metals. Additionally, the GDP deflator basket has expanded to 600 items, up from 180 in the old series, enhancing precision in economic measurement.
