India’s New GDP Series – Five Additional Methodological Changes

New GDP Series Latest News

• 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 series. 
• While changes such as double deflation, improved informal-sector estimates and the use of new price indices have received considerable attention, several other methodological changes have also been introduced.
• According to MoSPI, five additional changes aim to improve the accuracy, coverage and reliability of India’s national income estimates.

Improved Classification of Manufacturing and Services

• Earlier methodology (2011-12 series): 
  • Enterprises engaged in multiple activities were classified according to their major activity. 
  • Their entire Gross Value Added (GVA) was assigned to the sector contributing the largest share of turnover.
• New methodology (2022-23 series): An enterprise’s GVA is distributed between manufacturing and services according to the respective contributions of these activities.
• Data source: 
  • MoSPI uses information from the Ministry of Corporate Affairs’ annual MGT-7 and MGT-7A forms, which companies submit to disclose their financial and operational details.
  • These forms require companies to report business activities contributing at least 10% of their turnover, along with their respective shares.
• Significance: This activity-based classification provides a more accurate picture of sectoral GVA, particularly for enterprises engaged in both manufacturing and services.

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Inclusion of Government-Provided Housing Services

• Earlier GDP series:

• • It did not adequately account for the housing services provided to government employees living in government-owned accommodation.
  • While House Rent Allowance (HRA) is included in government employees’ salaries, the imputed value of housing services provided to employees was not separately accounted for.
• New methodology: The new series estimates the value of these housing services using the cost of constructing the houses, after accounting for repairs, maintenance and annual consumption of fixed capital.
• Significance: This improves the measurement of government-provided housing services and ensures more comprehensive coverage of economic activity.

Revision of the Useful Life of Fixed Assets

• The new GDP series has revised the estimated average useful life of several assets to calculate their annual consumption of fixed capital (depreciation).
• For instance, the average useful life of dwellings is now assumed to be 60-75 years, down from 70-80 years in the old series.
• MoSPI periodically reviews the useful life of assets, considering technological changes, obsolescence, operating conditions, maintenance practices and regulatory requirements.
• Significance: Revised asset-life estimates improve the measurement of depreciation and, consequently, the estimation of GVA and other national accounts aggregates.

Improved Estimation of Household Savings

• Household savings, an important component of national accounts, comprise financial assets, physical assets and valuables such as gold and silver. The new GDP series introduces two major changes.
• Financial savings: 
  • Data on shares, debentures, hybrid instruments and mutual funds are now sourced from the Securities and Exchange Board of India (SEBI), replacing the earlier reliance on the Reserve Bank of India (RBI). 
  • This enables the inclusion of newer investment instruments, including Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs) and Alternative Investment Funds (AIFs).
• Savings in valuables: The estimated nominal household savings in gold and silver ornaments for 2022-23 increased to ₹1.65 lakh crore, compared to ₹64,504 crore in the previous series.
• Significance: 
  • The revised methodology improves the coverage of financial instruments and provides a more comprehensive estimate of household savings.
  • The (above) estimates are based on the 2019 All India Debt and Investment Survey (AIDIS). MoSPI initiated a fresh AIDIS in July 2026, which is scheduled to conclude in June 2027.

Inclusion of Rooftop Solar Electricity

• The new GDP series includes electricity generated by households through rooftop solar panels for their own consumption. The estimation methodology varies across years.
• For example,
  • 2022-23 and 2023-24: Estimates are based on the respective Household Consumption Expenditure Surveys and the Ministry of Health’s population projections.
  • 2024-25 onwards: 
    • Estimates use the growth in installed rooftop solar capacity, as reported by the Ministry of New and Renewable Energy (MNRE), along with the applicable per-unit electricity price.
    • This electricity is included in the electricity, gas, water supply and other utility services sector.
• Significance: The inclusion of household-generated electricity improves the coverage of economic activity, particularly self-consumed renewable energy that may not be fully reflected in conventional electricity sales data.

Conclusion

• The five additional changes in the 2022-23 GDP series extend beyond the revision of the base year. 
• They improve the classification of economic activities, measurement of government services, estimation of depreciation, coverage of household savings and accounting for decentralised renewable energy.
• Together, these methodological improvements aim to make India’s national accounts more comprehensive and representative of structural changes in the economy.

Source: IE