Government To Implement Double Deflation in New GDP Series to Address IMF Concerns

On December 23, 2025, the government announced that the new GDP series will incorporate double deflation across all sectors. This marks a significant methodological shift, as India has never used this approach before.

The decision follows concerns raised by the International Monetary Fund (IMF) regarding statistical discrepancies and reliance on an outdated base year. Officials confirmed that the change aims to strengthen the robustness and credibility of official economic data.

What Is Double Deflation?

Double deflation is a statistical method used to calculate real value added by separately adjusting output and intermediate inputs for price changes. Unlike single deflation, which only deflates gross output, this approach uses relevant price indices for both production and input costs.

Real value added is then derived as the difference between deflated output and deflated inputs. This method provides a more accurate measure of volume growth, especially in sectors with complex cost structures.

Why Is the Change Significant?

The government’s move addresses IMF concerns about distortions in GDP measurement under the current system. Single deflation can misrepresent growth when input costs and output prices move at different rates.

Double deflation reduces these distortions and offers a clearer picture of sector-wise performance. It is particularly important for manufacturing and services, where supply chains and pricing dynamics are complex.

Official Statements and Process

NK Santoshi, Director General (Central Statistics), confirmed that India’s current GDP estimates do not use double deflation but the new series will adopt it fully. MoSPI Secretary Saurabh Garg stated that “in the new series there will be a double deflation, no single deflation in any.”

Officials said the government has held extensive consultations with the IMF, World Bank, and other stakeholders. Five panels have been formed to recommend best practices for base year revision, conducting 36 meetings so far.

Broader Context and IMF Concerns

The IMF raised concerns about statistical discrepancies and outdated methodologies in India’s GDP calculations. Officials explained that the economic structure has changed significantly with new industries, rapid digitisation, and policy measures like GST and toll tax reforms.

These developments have altered data flows and measurement processes, requiring updated methods. Adopting double deflation is part of a broader effort to align India’s data practices with global standards.

Read More: Fitch Raises India FY26 Growth Forecast to 7.4% on High Consumer Spending.

Conclusion

India’s decision to implement double deflation in the new GDP series represents a major step toward improving data accuracy. The method will provide a more reliable measure of real value added by adjusting both output and input prices.

This change responds to IMF concerns and reflects India’s commitment to strengthening statistical credibility. The revised series will better capture structural changes in the economy and enhance transparency in growth measurement.

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