​Data deficiencies: On India and the IMF’s low grading

The IMF’s ‘C’ grade for India’s national accounts statistics should be a matter of concern for India, which has a reasonably robust data collection and analysis apparatus in place. A ‘C’ grade is the second lowest there is, and implies that there are some issues with the data that impede the adequate surveillance of the economy. National accounts not only include zoomed out macro indicators such as GDP and GVA but also sectoral metrics and measures of investment levels, consumer spending and — of particular interest right now — how exports are doing. Issues with these metrics, therefore, impede effective and targeted policymaking. A grade of ‘C’ puts India in the same league as China when it comes to its national accounts, a decidedly unenviable position to be in. The IMF is not the first to point out the flaws in India’s national accounts. Nor is this the first time that it has pointed them out. The IMF’s main problem with the national accounts data, that its base year of 2011-12 is very outdated, has been pointed out time and again. Outdated data is a problem India has been grappling with for a while now. The Index of Industrial Production and the Consumer Price Index both have a base year of 2011-12. In fact, even the IMF said the reason that India’s CPI received a grade of ‘B’ and not ‘A’ was because of the outdated base year. The outdated base year and the inordinate weightage of food in the CPI have resulted in India not being able to accurately capture price movements. Consequently, the RBI’s monetary policy is also impaired.

The government is currently in the process of updating the base years and methodologies for national accounts, CPI, and IIP, with the new series due to be launched in early 2026. Perhaps the biggest issue with the national accounts statistics in India — and the area that requires the most attention — is the inability to accurately capture the informal sector. The informal sector, by definition, is extremely difficult to quantify since it comprises entities that are unregistered and cash-based. Yet, a more accurate estimate of the informal sector will not only materially impact the growth rate and size of the economy but will also lend crucial insight into how the bulk of India’s population is doing. India’s national accounts estimation has certainly improved over the years. The 2011-12 series included granular data from India’s corporate sector through the MCA-21 database, replacing the earlier Annual Survey of Industries. The proposed inclusion of GST data in GDP estimation in next year’s series is a welcome improvement. The IMF’s grade just further underscores how damaging delays in data releases and upgrades can be.