Paper: GS – II, Subject: International Relations, Topic: International Institutions, Issue: IMF’s Assessment of India’s GDP Data.
Context:
The International Monetary Fund’s (IMF) assessment of India’s national account statistics, specifically the ‘C-grade’ assigned to the country’s GDP data.
Key Takeaways:
IMF’s Assessment of India’s Data Adequacy:
Annual Evaluation: The IMF conducts annual bilateral discussions with member countries, as mandated by Article IV of its Articles of Agreement, to assess their economic developments and policies.
| The International Monetary Fund: The formation of the IMF was initiated in 1944 at the Bretton Woods Conference.IMF came into operation on 27th December 1945 and is today an international organization that consists of 189 member countries. Headquartered in Washington, D.C., IMF focuses on Fostering global monetary cooperation, securing financial stability, Facilitating and promoting international trade, employment, and economic growth around the world. The IMF is a specialized agency of UN. |
Understanding the IMF’s Rating System:
- Rating Scale: The IMF uses a four-tier rating system, ranging from A to D, to assess data adequacy.
- A: Data is adequate for IMF surveillance.
- B: Data has “some” shortcomings but is “broadly adequate.”
- C: Data has “some” shortcomings, which “somewhat hamper surveillance.”
- D: Data has “serious shortcomings that significantly hamper surveillance.”
- Comparison with Other Countries: China and South Africa also received median B ratings, while the US and the UK received A rating.
Reasons Stated by IMF:
- Outdated Base Year (2011–12): GDP and CPI rely on an old consumption and production structure that no longer reflects the modern economy.
- Use of WPI as Deflators: Lack of a full Producer Price Index (PPI) forces reliance on wholesale prices, weakening real GDP estimation.
- Production vs Expenditure Gaps: Large and recurring discrepancies suggest under coverage of expenditure data and informal sector activity.
- Limited Seasonal Adjustment: Quarterly GDP lacks robust seasonal adjustment, affecting interpretation of growth trends.
- Need for Better Statistical Techniques: IMF points to scope for improved modelling practices in national accounts.
Upcoming Changes and Future Outlook:
- New GDP Series: The MoSPI is set to launch a new GDP series with 2022-23 as the base year. The first quarterly number under the new series is expected to be released on February 27, 2026.
- Updated CPI Series: The updated CPI series, based on the 2023–24 Household Consumption Survey with 2024 as the base year, will be released on February 12, replacing the current 2012-based CPI series.
- Revised Index of Industrial Production (IIP): A revised IIP, also with 2022-23 as the base year, is expected.
- More Frequent Balance of Payments Data: The Reserve Bank of India is planning to release Balance of Payments data (including the current account balance) every month, in addition to the current quarterly practice.
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