Editorial 1: Data deficiencies

Context

The IMF’s low grading highlights how harmful delayed data updates can be.

Introduction

India receiving a ‘C’ grade from the IMF for its national accounts statistics raises serious concerns about the country’s data reliability and policy effectiveness. Despite having a robust statistical system, issues like an outdated base year, weak inflation measurement, and poor capture of the informal sector undermine accurate economic assessment and hinder targeted policymaking.

IMF’s ‘C’ Grade: Why It Matters for India

• The IMF giving India’s national accounts statistics a ‘C’ grade is concerning because India generally has a strong data collection and analysis system.
• A ‘C’ grade, the second-lowest, signals significant data issues that hinder effective monitoring of the economy.
• National accounts include GDP, GVA, sector-wise indicators, investment levels, consumer spending, and crucially, export performance.
• Weaknesses in these metrics restrict targeted and accurate policymaking.
• A ‘C’ grade places India in the same category as China, an undesirable global comparison.
• This is not the first time the IMF has flagged issues in India’s national accounts.

Core Problems Identified by the IMF

• The IMF’s primary criticism is the outdated base year (2011-12) used for national accounts.
• India has long struggled with obsolete base years in multiple indicators:
  • Index of Industrial Production (IIP) – base year: 2011-12
  • Consumer Price Index (CPI) – base year: 2011-12
• India’s CPI received only a ‘B’ grade (instead of ‘A’) due to the same outdated base year.
• The high weightage of food in the CPI further reduces accuracy in capturing price movements.
• Inaccurate inflation data affects the RBI’s monetary policy, making interest-rate decisions less effective.

Government Efforts to Fix the Data Issues

• The government is updating base years and methodologies for:
  • National accounts
  • CPI
  • IIP
• The new series is expected to be released in early 2026.

The Big Challenge: Capturing the Informal Sector

• India struggles to accurately measure the informal sector, which is:
  • Largely unregistered
  • Cash-based
  • Hard to quantify by definition
• Better informal-sector data would reshape:
  • The true size and growth rate of the economy
  • Understanding of how most Indians are actually doing
• Improving this area should be a top priority.

Improvements Already Made

• India’s data quality has improved over time:
  • The 2011-12 series incorporated MCA-21 corporate database instead of the older Annual Survey of Industries.
  • The upcoming national accounts series plans to include GST data, a major improvement.

What the IMF’s Grade Ultimately Signals

• The ‘C’ grade reinforces how harmful delays in updating data series and timely releases can be.
• India must accelerate data upgrades to ensure accurate surveillance, reliable policy decisions, and credible global standing.

Conclusion

The IMF’s rating highlights the urgent need for timely data upgrades, stronger methods, and better representation of the informal economy. With upcoming revisions to national accounts, CPI, and IIP, India can restore confidence in its statistical system. Ensuring accurate, updated, and credible data is essential for sound economic surveillance, effective monetary policy, and stronger global credibility.