New GDP Series Upgrades FY26 Growth to 7.6%
Context:
The Ministry of Statistics and Programme Implementation (MoSPI) has released the Second Advance Estimates (SAE) of National Income for the financial year 2025-26.
A significant highlight is the introduction of a new GDP series with a revised base year of 2022-23, replacing the decade-old 2011-12 base.
Under this new series, India’s real GDP growth for FY26 is projected at 7.6%, an upgrade from the 7.4% forecasted in the First Advance Estimates released in January
Key terms:
Base year is the reference year whose prices are used to calculate real growth.
Rebasing is the process of updating the base year using revised and improved data to reflect the current structure of the economy.
It serves as estimating GDP, as well as key indicators such as the Consumer Price Index (CPI) and the Index of Industrial Production (IIP) going forward.
Key Revisions and Data:
A key reform has been the revision of the GDP base year from 2011–12 to 2022–23 to better reflect India’s evolving economic structure.
The year 2022–23 has been selected as the new base year as it represents the most recent “normal” period following the disruptions of 2019–2021
FY26 Projection:
The growth rate for 2025-26 is now estimated at 7.6%, significantly higher than the previous estimate.
Nominal GDP, measured at current prices, is projected to grow by 8.6% during FY 2025-26.
Past Years:
The new series has revised the growth figures for previous years as well:
2024-25: Revised upward to 7.1% (from 6.5%).
2023-24: Revised downward to 7.2% (from 9.2%).
The nominal GDP (size of the economy) has seen a downward revision for the three years spanning 2023-26, which may impact fiscal ratios.
Methodological Changes:
The new series incorporates several structural improvements to better reflect the evolving economy:
Double Deflation Method:
A major shift is the move away from the "single-deflator" method.
The new series uses double deflation, where inputs and outputs are adjusted by their respective inflation rates.
This prevents the overstatement of growth during periods of falling commodity prices and offers a more accurate measurement of real GDP
New Data Sources:
The estimation now integrates data from GST, e-Vahan (vehicle registration), Annual Survey of Unincorporated Sector Enterprises (ASUSE), and the Periodic Labour Force Survey (PLFS) to improve granularity.
Supply and Use Tables:
These have been integrated to minimize discrepancies between GDP calculated via the production approach and the expenditure approach.
Sectoral Performance:
Gross Fixed Capital Formation (GFCF) has remained resilient at around 32% of GDP.
The Chief Economic Advisor noted that unincorporated enterprises showed "dynamism" with over 10% growth in machinery and equipment investment.
While private consumption remains resilient and rural demand is strong, urban consumption is recovering due to recent tax cuts.
The manufacturing sector recorded double-digit growth in both FY24 and FY26, emerging as a key driver of economic resilience.