"Five Lesser-Known Methodological Changes in India's New GDP Series"
Gross Value Added (GVA)
value of output minus cost of inputs used in production, the base for sectoral GDP estimates.
Double deflation
method of separately deflating output and inputs by different price indices to get real GVA.
India's national accounts are compiled by the National Statistics Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI). The base year used to value output at constant prices is periodically revised, moving from 2004-05 to 2011-12 and now to 2022-23. A base year revision is meant to reflect the current structure of production, incorporate newer surveys, and improve the accuracy of both nominal and real Gross Domestic Product (GDP) and Gross Value Added (GVA) estimates.
A useful distinction to hold onto here is between real and nominal GDP. Real GDP growth measures output at constant prices, so it fluctuates year to year with the business cycle. Nominal GDP at market prices, measured in current rupees, almost always keeps rising because it also absorbs price increases. This is exactly why a methodological change, not a real jump in economic activity, can make a value swing sharply. For instance, the nominal value of household gold and silver savings for 2022-23 has more than doubled in the new series purely because the estimation method changed, not because Indians suddenly became richer in gold.
The new series also carries forward earlier reforms: better informal-sector coverage through surveys, use of double deflation with an output Producer Price Index (PPI) and a Banking Services Price Index (BSPI) to compute real GVA, and an expectation that production-side and expenditure-side GDP estimates will show no discrepancy. The five changes below sit alongside these headline reforms and refine specific components of the accounts.
One significant change concerns how an enterprise engaged in multiple activities gets classified. Earlier, an enterprise was assigned entirely to its 'major activity': if most of its turnover came from manufacturing, its whole GVA was booked as manufacturing, even the part earned from services. The new series instead splits an enterprise's GVA across manufacturing and services in proportion to each activity's actual share, using data from the MGT-7 and MGT-7A forms that companies file annually with the Ministry of Corporate Affairs. These forms require listing every activity contributing at least 10% of turnover, along with its share, giving MoSPI a factual basis for the split.
A second change values the housing service the government provides to employees living in official accommodation, something HRA already captures in pay but which was previously left out of the accounts. This value is estimated from construction cost, minus repair and maintenance costs and the annual consumption of fixed capital. …
With reference to Indian economy, consider the following statements:
1.The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2.The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
Consider the following statements regarding India's new GDP series (base year 2022-23):
1.Real Gross Value Added is now computed using double deflation with an output Producer Price Index and a Banking Services Price Index.
2.The base year of India's GDP series was updated directly from 2004-05 to 2022-23.
Which of the statements given above is/are correct?
Match List I (change in India's new GDP series) with List II (source/basis used):
List I:
A.Sectoral classification of a multi-activity enterprise's GVA
B.Household financial savings (shares, mutual funds)
C.Household savings in gold and silver
D.Rooftop solar electricity generation (recent years)
List II:
1.All India Debt and Investment Survey
2.Installed capacity data from the Ministry of New and Renewable Energy
3.MGT-7/MGT-7A forms filed with the Ministry of Corporate Affairs
4.Securities and Exchange Board of India data
Select the correct answer using the code given below:
Which of the following statements about real and nominal GDP is/are correct?
1.Real GDP is measured at constant prices, so its growth rate can decline even when actual output rises, if the base-year adjustment changes.
2.Nominal GDP at market prices, measured in current rupees, tends to rise almost every year because it also reflects price changes.
Select the correct answer using the code given below:
In India's new GDP series (base year 2022-23), which body's data is now used to classify a multi-activity enterprise's Gross Value Added between manufacturing and services?
With reference to India's new GDP series, consider the following statements:
1.The assumed average useful life of dwellings has been revised upward compared to the earlier series.
2.Electricity generated by households through rooftop solar panels is now included in the GVA of the utility services sub-sector.
Which of the statements given above is/are correct?
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