Market Update: A revision of GDP and its implications – Full Analysis

Annual gross domestic product (GDP) is the sum of the final value of all goods and services produced during a year, net of material inputs. It is the most widely used measure of a country’s economic size. GDP, or the economy’s gross value added (GVA), is an estimate prepared using a wide range of data on physical outputs and their prices, and this involves numerous statistical procedures. The estimates broadly follow the global templates of the UN System of National Accounts (UNSNA). The latest revision, with base year 2022-23, follows its 2025 edition.

Roughly every five to ten years, the base year for National Accounts Statistics (NAS) is revised. This includes GDP estimates and other aggregates such as national savings, consumption, and investment.

The revision accounts for changes in what an economy produces and its prices. As the economy expands, the mix of goods and services produced — and their prices — changes. These shifts affect the “real size” of the economy, that is, excluding price rise. Revising the NAS is therefore a complex and massive task, undertaken periodically by the National Statistical Office (NSO) of every country.

Awaited revision

This time, the release of the revised NAS was eagerly awaited as it was being issued after 11 years. The previous revision, with the base year 2011-12 and released in 2015, had prompted many data users — both official and independent analysts — to question the veracity of the GDP estimates.

For some sectors, such as manufacturing, the annual growth rates in the 2011-12 base-year series (when compared with earlier estimates) were not only higher, but the direction of change was also different.

The economic structure reported in the 2011-12 base year series also looked quite different from earlier structures. For example, the size of the non-financial private corporate sector (PCS) estimated in the 2011-12 series was much bigger than reported previously. Many experts have repeatedly shown that the official GDP growth rates based on the 2011-12 series during the last decade or so are distinctly overestimated. More recently, the International Monetary Fund (IMF), in its review of the quality of economic statistics of its member countries, awarded India a ‘C’ grade for the quality of its NAS, much to the country’s embarrassment.

Against this backdrop, the recently released GDP series with 2022-23 as the base year acquired considerable significance. What are the main changes in the new series and why? Here, we will discuss the changes in GDP estimates from the production, reserving a similar discussion on consumption (or expenditure) and prices for another day. Two kinds of comparisons are reported at current prices: first, the annual percentage change between the latest estimates (2022-23 series) and the previous estimates based on the 2011–12 series for the overlapping years 2022-23 and 2023-24; and second, the changes in the GDP shares of principal sectors between the two series for the same years.

Key findings

The revised estimates show that GDP’s absolute size has shrunk by about 3-4% in the new series compared with the earlier one (Figure 1). However, the annual growth rates by the new and the old series are not very different (plus or minus one percentage point) (Figure 2).

The production structure has also changed somewhat. The GDP shares of agriculture and industry (or the secondary sector) have increased, while the share of services has declined. Within the industry, the share of manufacturing has marginally increased to 14.7% of the economy from 14.3% previously (Figure 3).

At the same time, the absolute size of the manufacturing sector has shrunk by about 1.5-1.6% when compared with the previous series (Figure 4). This decline, though marginal, is significant because this sector was central to much debate during the previous revision.

In terms of institutional classification of GDP, the share of the non-financial private corporate sector (PCS) has declined by 1.5 percentage points, from 35.4% in the earlier series to 33.9% in the new series for 2022-23. This drop is steeper for 2023-24, with a gap of 3.4 percentage points. This change is significant as the size of the PCS in GDP was much debated after the previous revision (Figure 5).

The household or informal sector’s share in the economy has increased marginally compared with the 2011-12 series — by 0.7 percentage points in 2022-23 and by 2.7 percentage points in 2023-24. The rise in the new series is partly or entirely on account of agriculture (Figure 5) (smaller sectors are ignored for brevity).

Interpreting changes

In principle, rebasing the NAS should not change the absolute size of GDP at current prices, because the underlying economy being measured remains the same. If anything, the revision could enlarge the absolute size, as newer estimates — obtained using better data sets and methods — are expected to capture new activities or those that were inadequately captured earlier. Hence, on the face of it, the reduction in the absolute GDP size in the new series appears surprising. However, as mentioned earlier, given the widely held view of the overestimation of GDP growth rates in the earlier series, the observed reduction may represent a welcome correction.

Such a correction — though it may appear minor — implies changes to our understanding of the economy’s performance. For instance, with the reduced (or corrected) GDP size, the goal of attaining a five-trillion-dollar economy, a target set by the Prime Minister in 2019, might be further delayed.

While the correction in the absolute economic size is welcome, it remains unclear whether the revision has addressed all the red flags raised with respect to the 2011–12 series. Likewise, it is not yet clear if the latest revision tackles the questions raised by the IMF in its review.

From what we know, the changes made seem to at least partially look into the issues raised. However, it is possible that the slower or faster growth rates reported in the new series may merely be on account of methodological changes introduced, or a newer dataset used or application of a newer “rates and ratios”. Hence, a release of more methodological details of the revision for a fuller assessment of the veracity of the new GDP series is awaited.

(R. Nagaraj was formerly with Indira Gandhi Institute of Development Research (IGIDR), Mumbai; Vikash Vaibhav is with OP Jindal Global University, Sonepat)

Published – March 11, 2026 11:25 pm IST