Overhaul of Economic Indicators
India's Union government is preparing to revise key economic indicators, including the Consumer Price Index (CPI), Index of Industrial Production (IIP), and Gross Domestic Product (GDP). These updates are crucial for reflecting the true state of a rapidly developing economy.
Need for Revision
- The last revisions were delayed due to the pandemic and gaps in household consumption expenditure surveys.
- The base year for the current GDP series is 2011-12, and significant economic changes necessitate a new base year and data sources.
Expected Changes
Revisions will include new data sources to make indices more robust.
- The new CPI will incorporate price data from approximately 2,900 markets, up from 2,300.
- Online data from 12 cities will be collected to account for e-commerce growth.
E-commerce and Data Usage
- The government is considering a separate e-commerce index to track household consumption patterns.
- Monthly data releases could serve as key indicators of economic trends.
Incorporation of New Data Sources
The GDP estimates will now include data from the Goods and Services Tax Network and the National Payments Corporation of India, which were not available earlier.
Importance of Accurate Data
Accurate data is vital for policymaking and private sector decisions.
- New consumption data suggests potential changes in the CPI food weighting.
- Inflation targeting frameworks require precise data to guide monetary policy effectively.
Challenges and Considerations
- Surveys are still based on samples drawn from the 2011 Census.
- There is a need for a Producer Price Index for better conversion of nominal to real GDP.