India’s impressive 8.2% GDP growth in the second quarter has been widely celebrated. Yet, almost unnoticed in public discourse, the International Monetary Fund (IMF) has raised serious concerns about how India measures its national income. By assigning India’s national accounts statistics a ‘C’ grade — the second lowest — the IMF has questioned not the growth outcome alone, but the credibility of the measurement itself.
What triggered the IMF’s concern?
The IMF’s assessment relates to the quality, coverage and reliability of India’s national accounts data, which include Gross Domestic Product (GDP) and Gross Value Added (GVA). A ‘C’ grade signals significant methodological weaknesses, particularly in data sources and estimation techniques.
This concern coincided with the release of Q2 data showing 8.2% growth, a figure far exceeding expectations. However, the IMF’s warning received minimal media attention, raising questions about how economic data are reported and interpreted in India’s public discourse.
The core issue: Measuring the unorganised sector
At the heart of the IMF’s critique lies India’s method of estimating the unorganised sector. Even after excluding agriculture, the informal sector accounts for nearly 30% of India’s GDP.
India currently uses the organised sector as a proxy to estimate growth in the unorganised sector. In simple terms, it assumes that both sectors move in tandem. When organised manufacturing or services grow, the informal counterparts are assumed to grow similarly.
This approach works only if both sectors follow comparable trends — an assumption that breaks down during periods of economic disruption.
Why proxy estimation becomes unreliable in crises
Former Chief Statistician Pronab Sen and economist Arun Kumar have described this proxy method as “less than reliable”. Their argument is rooted in recent economic shocks that affected sectors unevenly.
During demonetisation, the rollout of the Goods and Services Tax (GST), and the COVID-19 pandemic:
- The organised sector showed resilience or even expansion
- The unorganised sector suffered sharp contractions
Using organised-sector data as a proxy during these years would therefore overestimate informal sector output. This means that headline GDP figures may have painted a rosier picture of economic performance than what large sections of the workforce actually experienced.
What this means for quarterly GDP estimates
Quarterly GDP estimates are particularly vulnerable to such distortions. India lacks comprehensive high-frequency data for most segments of the economy, especially the informal sector.
As Pronab Sen has pointed out, quarterly estimates rely heavily on assumptions, extrapolations and past relationships rather than real-time measurement. Until physical data collection improves — through surveys, enterprise tracking and labour statistics — quarterly GDP numbers will continue to rest on fragile foundations.
Can methodological revisions fix the problem?
The Ministry of Statistics and Programme Implementation is in the process of updating the GDP base year and revising estimation methods, with a new series expected by early 2026.
However, the fundamental challenge remains: capturing accurate data from millions of informal enterprises that operate outside formal reporting systems. Simply changing base years or formulas cannot substitute for robust ground-level data collection.
On whether India can fully address the IMF’s concerns, the assessment from within the statistical system is pessimistic. According to Pronab Sen, the limitations are structural and unlikely to be resolved quickly.
Why this debate matters beyond statistics
GDP figures shape policy decisions, investor confidence, fiscal planning and political narratives. If growth numbers overstate reality, policy responses may underestimate distress in employment, incomes and small enterprises.
Equally important is the role of the media. When concerns raised by institutions like the IMF are marginalised or buried, public understanding suffers. Economic data then become celebratory headlines rather than tools for accountability and informed debate.
What to note for Prelims?
- IMF gave India’s national accounts statistics a ‘C’ grade in 2025
- Unorganised sector contributes about 30% to GDP (excluding agriculture)
- India uses organised sector data as a proxy for informal sector estimation
- Quarterly GDP estimates rely heavily on assumptions due to data gaps
What to note for Mains?
- Limitations of GDP measurement in economies with large informal sectors
- Impact of demonetisation, GST and COVID-19 on organised vs unorganised sectors
- Credibility of high-frequency economic indicators
- Role of statistical transparency in economic policymaking
- Media responsibility in reporting macroeconomic data
