Why in the News?

• The government has released the New GDP Series 2022-23 base year, revising FY26 growth to 7.6% and Q3 growth to 7.8%.

What’s in Today’s Article?

• New GDP Series (Introduction, Revisions in Growth Rates, Methodological Improvements, Sectoral Growth Trends, Impact, etc.)

Introduction of the New GDP Series

• The Ministry of Statistics and Programme Implementation (MoSPI) has introduced a new GDP series with 2022-23 as the base year, replacing the earlier 2011-12 base year.
• Base year revision is a standard statistical exercise undertaken periodically to reflect structural changes in the economy, incorporate new data sources, and improve methodology.
• The last major revision was done in 2015, when the base year was shifted to 2011-12.
• Under the new series, India’s GDP growth for October–December 2025 (Q3 FY26) has been estimated at 7.8%, while full-year growth for FY26 is projected at 7.6% as per the second advance estimates.
• This is higher than the earlier estimate of 7.4% for FY26 under the old series.

Revisions in Growth Rates

• The new series has led to significant revisions in past growth numbers.

• FY23-24 growth has been revised downward to 7.2% from 9.2% under the old series.
• FY24-25 growth has been revised upward to 7.1% from 6.5%.
• FY25-26 growth is estimated at 7.6%.

• Quarterly revisions also show changes:

• Q1 FY26 growth: 6.7%
• Q2 FY26 growth: 8.4%
• Q3 FY26 growth: 7.8%

• These revisions reflect updated methodology and improved data coverage.
• MoSPI has indicated that a full back series, recalculated historical GDP data, will be released by December 2026.

Methodological Improvements

• The most important methodological change is the shift from the “single-deflator” method to the “double-deflation” method for calculating real Gross Value Added (GVA).
• Earlier, a single price deflator was used to adjust nominal values to real terms in most sectors. This could sometimes overstate growth when input and output prices behaved differently.
• Under double deflation, both inputs and outputs are adjusted separately using their respective inflation rates.
• This allows for more accurate measurement of real economic growth and aligns India’s methodology with international best practices.
• The new series also incorporates additional data sources, such as:

• GST data
• e-Vahan vehicle registration data
• Annual Survey of Unincorporated Sector Enterprises
• Periodic Labour Force Survey

• Further, national accounts have been integrated with Supply and Use Tables to reduce the “discrepancy” between production-based and expenditure-based GDP estimates.

Sectoral Growth Trends in FY26

• Secondary Sector
  • The secondary sector is expected to grow at 9.5% in FY26, up from 7.3% in FY25.
  • Manufacturing is projected to grow at 12.5%, compared to 8.3% in the previous year.
  • Construction growth is estimated at 6.9%, slightly lower than 7.1% in FY25.
• Primary Sector
  • The primary sector is expected to slow to 2.8% in FY26 from 5% in FY25.
  • Agriculture growth is estimated at 2.5%, down from 4.3%. Mining and quarrying growth is projected at 5%, compared to 11.2% earlier.
• Tertiary Sector
  • The services sector is expected to grow at 8.9%, up from 8.3% in FY25.
  • Trade, hotels, transport and communication are projected to grow at 10.3%, while financial, real estate, IT and professional services are expected to grow at 10%.
  • This indicates strong momentum in manufacturing and services, offset by a moderation in agriculture.

Downward Revision in Nominal GDP

• While real growth has been upgraded, the nominal size of the economy has been revised downward.
• India’s nominal GDP for FY26 is estimated at Rs. 345.47 lakh crore, about 3.3% smaller than earlier estimates under the old series.
• The size of the economy for FY24 and FY25 has also been revised downward by about 3.8% each.
• Nominal GDP represents the current-price value of the economy and is crucial for calculating fiscal ratios.

Impact on Fiscal Ratios

• Since fiscal indicators such as fiscal deficit-to-GDP and debt-to-GDP are expressed as a percentage of nominal GDP, a lower GDP base automatically increases these ratios.
• The fiscal deficit for FY26 is now estimated at 4.51% of GDP instead of 4.36%, even though the absolute deficit amount remains unchanged.
• Similarly, the debt-to-GDP ratio for FY27 is pegged at 57.5%, compared to the earlier target of 55.6%.
• This makes the government’s debt consolidation path toward its FY2031 target of reducing debt to 50% of GDP steeper.