IMF backs India's revised GDP methodology amid row over growth figures

The International Monetary Fund (IMF) has welcomed India's revised gross domestic product (GDP) calculation methodology, saying it aligns with best practices and is consistent with the advice provided by the organisation's statistics department.

Krishna Srinivasan, Director of the IMF's Asia and Pacific Department, described the revision as a “welcome development” while speaking to reporters in Bangkok on Thursday.

“These revisions to the methodology are entirely consistent with the advice we've been giving them, including from our statistics department,” Srinivasan said.

He noted that India had also released a note explaining the changes to its GDP methodology. While there was room for further improvement, he commended the Ministry of Statistics and Programme Implementation (MoSPI) for its efforts to improve GDP statistics.

“In terms of GDP numbers, what they have done is consistent with good practices. I would say there's always room for improvement, but let's recognise the good work done by MoSPI for improving GDP statistics,” he said.

IMF says currency pressure does not signal economic weakness

Srinivasan also said India had weathered the energy shock with strong economic fundamentals and responded well to the challenges. He cautioned against interpreting pressure on the rupee as a sign of economic failure.

The exchange rate is influenced by several external factors, including global interest rates, investor risk appetite and oil prices, he said. The pressure on the currency, therefore, did not indicate a fundamental disconnect between India's exchange rate and its economic growth.

The IMF's Regional Economic Outlook for Asia and the Pacific, released on Thursday, identified India among emerging economies whose currencies came under pressure following the energy shock.

The report noted that the pressure had eased somewhat over the preceding months. It also listed India among the economies that had intervened in foreign exchange markets.

GDP data triggers political row

India's revised GDP methodology has come under scrutiny following the release of stronger-than-expected economic growth figures. The government reported GDP growth of 7.8 per cent for the April-June quarter, prompting criticism from former Finance Secretary S C Garg.

Garg alleged that the growth figures had been artificially inflated by compressing the previous year's data. Opposition parties subsequently cited his claims to question the credibility of the government's GDP estimates.

Chief Economic Advisor V Anantha Nageswaran dismissed Garg's approach as “cherry-picking” data. He explained that the latest GDP figures had been calculated using the financial year ending March 2023 as the new base year, with the methodological changes also resulting in revisions to quarterly data for the previous year.

India projected to overtake Japan as fourth-largest economy

Separately, IMF projections released on Thursday indicate that India is set to overtake Japan to become the world's fourth-largest economy by nominal GDP in 2027.

Japan is projected to retain its position as the world's fourth-largest economy in the near term. However, India is expected to move ahead in 2027, with its nominal GDP reaching $4.52 trillion, according to the IMF's projections.