India’s Statistical Database Overhaul
Why in News
- Last November, IMF graded India’s national accounts statistics a ‘C’ grade, the second-lowest. India has since made several wide-ranging upgrades covering GDP, GVA, IIP, CPI, WPI and a new PPI.
Why an Overhaul Was Needed
- GDP, GVA and IIP had an outdated base year of 2011-12 making data less representative.
- CPI and WPI had base years of 2012 and 2011-12 respectively, thus measuring 15-year-old consumption patterns.
- Outdated indices still included DVDs, cassettes and tape recorders no longer used by households.
- New items like CNG, PNG and online streaming services were not captured in older indices.
National Accounts: Key Reforms
- New Base Year: Updated to 2022-23 making data far more representative of current reality.
- Double Deflator Method: Now used for agriculture and manufacturing adjusting input and output prices separately for accuracy.
- Multi-Activity Enterprises: Output of companies active across sectors is now allocated proportionately to each sector rather than one dominant sector.
- New Data Sources: GST data and Periodic Labour Force Surveys are now incorporated into national accounts.
Index of Industrial Production (IIP): Changes
- Base year updated to 2022-23 with expanded coverage including gas supply, water supply, sewerage and waste management.
- Greater granularity now provided on sources of electricity (renewable and non-renewable) and types of minerals.
- Revised item basket now covers 1,042 products mapped to 463 item groups compared to 839 items in the previous series.
Inflation Indicators: CPI, WPI and New PPI
- Consumer Price Index (CPI):
- Base year updated to 2024 pegged to the Household Consumption Expenditure Survey of 2023-24.
- Total items measured increased from 299 to 358 with 12 categories instead of the previous six.
- New additions include rural house rent, CNG, PNG and online media streaming services.
- Obsolete items like VCRs, DVD players and cassettes have been removed from the basket.
- Wholesale Price Index (WPI):
- Base year revised to 2022-23 with items expanded from 697 to 957.
- Crude petroleum and natural gas moved from Primary Articles to the Fuel and Power category logically.
- Producer Price Index (PPI) — New Introduction:
- The Commerce Ministry introduced the PPI which separately tracks prices producers pay for inputs and receive for outputs.
- Unlike WPI, PPI excludes transport costs and indirect taxes making it a more accurate producer-level measure.
- PPI incorporates both goods and services making it more holistic than the WPI.
- WPI will be phased out over the next five years leaving CPI and PPI as the two principal price indices.
Significance
- Monetary Policy: RBI’s Monetary Policy Committee uses CPI to gauge inflation and decide interest rates.
- Government Employees: Dearness Allowance and Dearness Relief for current and former government employees are pegged to inflation.
- Real GDP Measurement: Real economy growth is calculated after adjusting for inflation making accurate price data critical.
- Credibility: These upgrades directly address the IMF’s concerns about India’s data quality and international credibility.
Source: The Hindu