Why India's IMF rating deserves nuanced understanding and not trolling

The Ministry of Statistics and Programme Implementation (MoSPI) has announced plans to release the new GDP series with 2022-23 as the base year in 2026. (Representative image)

The recent C grade assigned to India by the International Monetary Fund (IMF) has sparked a mix of reactions, with some critics rushing to troll the nation's economic progress. However, there's more to the story than the straightforward comments that overlook the complexities and nuances of the IMF's data quality rating system.

Let’s examine the report to understand what this rating really means and why India scores well enough in many respects.

The IMF's four-tier system is applied uniformly across all 190+ IMF member countries as part of regular Article IV consultations. Countries can improve their ratings by enhancing their statistical systems, demonstrating a commitment to data transparency and quality for more effective economic surveillance and policy recommendations.

The IMF report highlights India’s overall healthy economic performance. The point of contention is specifically the "quality of data" used for National Accounts, which received a C rating with a targeted concern about one specific methodology rather than a systemic failure across India's entire statistical system.

Importantly, all other data categories received B ratings, demonstrating India's generally strong statistical infrastructure. These B-rated categories include: inflation data (both consumer and wholesale price indices), government finance statistics (covering fiscal deficits, public debt, and expenditure), external sector statistics (balance of payments, trade data, and foreign exchange reserves), monetary and financial statistics (banking sector data, credit flows, and monetary aggregates), and inter-sectoral consistency (ensuring data alignment across different economic sectors and measurement approaches).

India's GDP calculations still use 2011-12 as the base year, which is now over 13 years old. International best practice recommends updating base years every 5 years to accurately capture structural economic changes.

The 2011-12 base misses the digital economy boom, the rise of e-commerce platforms like Flipkart and Amazon India, the expansion of the gig economy, and significant shifts in consumption patterns post-smartphone revolution. This creates a growing disconnect between measured GDP and actual economic activity.

India uses the Wholesale Price Index (WPI) for GDP deflation instead of a Producer Price Index (PPI). The WPI tracks prices at wholesale markets and doesn't accurately reflect factory-gate prices or true production costs. For example, WPI includes taxes and distribution margins that can distort actual production price changes.

A PPI would measure prices received by domestic producers for their output, providing more accurate deflation for GDP calculations and better alignment with international standards used by OECD countries.

There are also statistical discrepancies between India's production approach (measuring output by industries) and expenditure approach (measuring consumption, investment, exports minus imports).

Ideally, both methods should yield identical results, but these gaps suggest measurement issues in capturing informal sector activity, agricultural output variations, or inventory changes.

Despite specific methodological shortcomings, India demonstrates significant strengths in other technical areas. It performs well on frequency, with quarterly GDP releases issued within 60 days of the quarter's end.

Timeliness is also a strong point, as provisional estimates are often available within 31 days. Furthermore, India provides impressive data granularity, offering state-level GDP data and classifications across 33 industries in its national accounts, which is valuable for detailed economic analysis.

These detailed aspects of data frequency, timeliness, and granularity demonstrate India's comparatively robust statistical infrastructure. Despite the methodological concerns raised regarding specific national accounting practices, the consistent and comprehensive release of a wide array of economic data underscores provides valuable resources for in-depth economic analysis and informed policymaking.

The Ministry of Statistics and Programme Implementation (MoSPI) has announced plans to release the new GDP series with 2022-23 as the base year in 2026.

Updating the base year involves a massive data collection effort to survey millions of establishments and households. This process requires meticulous attention to detail to ensure the new series accurately reflects the economy while maintaining backward compatibility with historical data for trend analysis.

Using 2022-23 would capture structural shifts including: the maturation of digital infrastructure (5G rollout, 750+ million smartphone users), the formalization push from GST implementation (2017), the expansion of the gig economy (estimated 7.7 million workers), and the growth of renewable energy sectors. This base year would also incorporate updated consumption baskets reflecting changed household spending patterns, including data from the household consumption and expenditure survey ( HCES 2022-23).

The food collective in the household platter and how it has changed over the years can be an interesting way to gauge and map India’s progress.

Here’s an instructive piece of statistics. The government’s household consumption and expenditure survey (HCES 2022-23) data show that consumption of protein-rich food items such as pulses, milk, eggs and fish have risen faster than food staples such as cereals.

In 1999-2000, rural households, on an average spent, 22 per cent of total consumption spending on cereals such as rice and wheat. This was disproportionately high, leaving little for spending on buying protein-rich items. This has dramatically come down to 4.91 per cent. Urban households used to spend 12 per cent on cereals in 1999-200. This has come down to 3.94 per cent in 2022-23.

In 2014-15 India produced 146.3 million tonnes of milk. In 2022-23 it stands at 230.6 million tonnes. The number of egg production has gone up from 78,484 million in 2014-15 to 1,38,376 million in 2022-23, nearly doubling in nine years. Fish production, likewise, has vaulted from 10,762 thousand tonnes in 2014-15 to 17,545 thousand tonnes in 2022-23, up more than 70 per cent.

This, perhaps, explains why paneer, one of the most popular high-protein vegetarian foods, is more commonplace now than two decades ago.

The Ministry of Statistics has allocated specific funds for statistical infrastructure modernisation in the 2025-26 budget, with PPI development as a priority initiative.

A proper PPI would cover 8,000+ products across manufacturing, mining, and utilities, with separate indices for different stages of production (raw materials, intermediate goods, finished goods).

The IMF's rating is not a judgment to warrant the kind of triumphalism or despair that has characterized some of the reactions.