In its latest annual review, the International Monetary Fund (IMF) has assigned a ‘C’ grade to India’s national accounts statistics — a category that includes crucial economic indicators such as the Gross Domestic Product (GDP) and the Gross Value Added (GVA). Grade ‘C’ is the second-lowest rating and signals that the data has shortcomings significant enough to hinder accurate economic assessment. The IMF’s downgrade has revived the debate over whether India’s economic statistics truly reflect the state of the economy or whether structural gaps and methodological issues are distorting the whole picture. Ironically, just days after this IMF review, the National Statistics Office (NSO) came out with the quarterly GDP numbers. According to NSO data, the Indian economy grew by a higher-than-expected 8.2 per cent, a six-quarter high, in the second quarter (July to September) of the current financial year.
It is pertinent to note here that over the past decade, India’s GDP numbers have increasingly come under scrutiny from economists, global institutions, and investors, triggering a larger debate about the reliability of official data released by the country. The NSO data on GDP released every quarter has been constantly placing India as the world’s “fastest growing” major economy. Despite this, foreign investors are shunning India. Over the last 21 months, foreign institutional investors (FIIs) have pulled out a whopping Rs 3.19 lakh crore from Indian equities, evidencing a sustained trend of foreign capital exit. Also, the high unemployment levels and sluggish private capital investment do not jell with the robust GDP numbers. Indians living in India are surely experiencing the slowest grinding economy the country has ever seen.
According to the IMF’s Article IV assessment, India’s national accounts are published regularly and on time, and they offer a reasonable level of detail. However, the Fund notes the presence of important “methodological weaknesses” that hamper effective surveillance of the economy. The IMF’s concerns extend well beyond GDP estimates. India’s main inflation gauge — the Consumer Price Index (CPI) — has been given a ‘B’ grade. While CPI data is released monthly and with minimal delay, the IMF argues that the index is based on an outdated structure. The base year, the basket of items, and the expenditure weights have not been updated since 2011–12. This implies that the index may no longer reflect contemporary consumption patterns, as a result of which inflation readings may not accurately capture the lived experience of consumers. Perhaps this explains why the government gives inflation figures in single digits, even as a majority of the country’s population experiences that the cost of living is unbearably high and increasing on a daily basis. Everything, from essentials to healthcare to recreational activities, has become exorbitantly expensive and beyond the reach of common citizens.
India has also delayed its all-important Census by six years. While the last Census was conducted in 2011, the next one was scheduled for 2021. But it has been postponed, initially due to the CoVID-19 pandemic and subsequently because of administrative and technical issues. The government has now scheduled the Census for 2026-27. Such inordinate delay in vital data release could lead to policy paralysis.
Accurate, credible and timely data is critical for any economy, but for a developing economy like India, it is all the more essential. Reliable data is the foundation on which investors, policymakers, businesses, and global institutions make decisions. When data is inaccurate, inconsistent, or lacks transparency, the entire system suffers. Hotmail cofounder Sabeer Bhatia recently said that India is calculating its GDP wrong. “The whole country is lying, our GDP is all wrong,” he remarked, illustrating flaws in calculation calling it basic math.
If India aspires to become a developed economy our government and policymakers must, first of all, understand that credibility is the strongest currency. Political considerations must not be allowed to hamper truth to come to light. Sadly this country today cannot boast of any institution that is independent, impartial and unbiased. Replacing a single individual with another person seems to successfully pervert all the output of any organization. That is making all current data suspect in India of today. A country that is forced to offer 60% of its population free rice and parties in power offer small amounts of money as sops to attract votes shows the real picture about the nation’s economy.