India’s new GDP series has changed how real economic activity is measured, particularly in manufacturing. One of the most important changes is the move from single deflation to double deflation, under which the prices of output and intermediate inputs are adjusted separately. The change is intended to improve the measurement of real gross value added when output and input prices move differently.
This distinction matters because nominal changes in manufacturing value do not necessarily reflect changes in production. If the price of a factory’s output rises while the prices of its raw materials, energy and other intermediate inputs move at a different rate, a single price adjustment can distort the estimate of real value added. Double deflation addresses this by separately adjusting output and intermediate consumption using appropriate price measures.
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The objective, therefore, is not to produce a higher manufacturing growth rate. It is to obtain a more appropriate measure of the real value created during production. A methodological change should be assessed on that basis rather than by whether it raises or lowers the headline number.
The new approach also needs to be understood in the context of the wider revision of India’s national accounts. The new series, with 2022-23 as the base year, incorporates new data sources, revised estimation procedures and more granular price information. MoSPI released its detailed Sources and Methods for Compilation of National Accounts Statistics on September 21, 2026, setting out the framework behind the new series.
Why double deflation changes manufacturing estimates
Manufacturing is particularly sensitive to the choice of deflator because intermediate inputs can account for a substantial share of output. Steel, chemicals, electricity, fuel and other inputs may experience price movements that differ considerably from those of the finished products made using them.
Under single deflation, the same broad price movement can be used to adjust both output and intermediate consumption. That approach can misrepresent real value added when the two sets of prices diverge. Double deflation instead converts output and intermediate consumption into constant-price terms separately, with real GVA derived from the difference between the two.
The new series applies double deflation across most manufacturing categories. According to the methodology released by MoSPI, 28 of the 30 manufacturing compilation categories use the approach. Two categories continue to use a different method because the mapping of imported inputs to the available item-level price data presents difficulties.
This qualification is important. Double deflation is an improvement in the statistical framework, but it does not eliminate the underlying data problems that affect national accounts. Its effectiveness depends on the quality, coverage and timeliness of the price and production information available to statisticians.
The introduction of the Producer Price Index also strengthens the price-measurement framework. Producer-side prices can provide a more appropriate basis for measuring changes in production than price measures designed for other purposes. The new series uses more granular price information rather than relying solely on broad aggregate indices.
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GDP measurement is changing beyond deflation
The revision to manufacturing deflation is only one part of the changes to the national accounts.
MoSPI has expanded the use of administrative and corporate data. Company information, GST records and other administrative sources provide additional evidence on economic activity during the year. The treatment of the informal sector has also been revised, with greater use of survey information to reduce reliance on older proxy indicators.
Quarterly GDP estimation has changed as well. The new series uses Proportional Denton benchmarking to align quarterly estimates more closely with annual national accounts. This is important because quarterly estimates are based partly on high-frequency indicators and are subsequently revised as more information becomes available.
The use of more data does not automatically make an estimate more accurate. What matters is whether the data have appropriate coverage, whether definitions are consistent and whether the methods used to combine different sources are transparent.
That is why documentation is as important as methodological refinement. Researchers and other users of national accounts need to be able to understand which sources are being used, how estimates are constructed and why revisions occur.
A negative deflator is not necessarily a statistical error
Double deflation can also produce results that appear counterintuitive.
If the prices of both manufacturing output and intermediate inputs rise, but input prices increase faster than output prices, the implicit price deflator for manufacturing GVA can decline. This does not mean that the prices of manufactured goods have fallen across the economy. It reflects the difference between the price movements of output and the inputs used to produce it.
The distinction is important when interpreting the new GDP data. A manufacturing GVA deflator is not the same thing as consumer inflation, and it should not be read as a measure of the prices faced by households.
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Nor should an unusual movement in an implicit deflator by itself be treated as evidence that the GDP estimates are wrong. The underlying output and input price movements need to be examined first.
This also illustrates why revisions to GDP cannot be interpreted simply by comparing old and new growth rates. Changes in the base year, data sources, classifications, weights and deflation methods can all affect the estimates. A revision may therefore reflect changes in measurement as well as new information about economic activity.
Transparency will determine the credibility of the new series
The broader objective of the new national accounts series is to improve the measurement of an economy whose structure has changed substantially since the previous base year was introduced.
That requires more than replacing one deflator with two. It requires better source data, more detailed price information, improved measurement of the informal sector and clear documentation of the estimation process. The release of MoSPI’s Sources and Methods document is an important step because it allows users to examine the methodology behind the published estimates.
The next test is whether researchers can use the underlying information to understand significant revisions and reproduce the broad logic of the estimates. Wider access to data would make that assessment easier and strengthen independent scrutiny.
Double deflation should therefore be seen as one component of a larger effort to improve India’s national accounts. Its purpose is to measure real manufacturing value added more appropriately when output and input prices move differently. Whether the new GDP system ultimately produces a better picture of economic activity will depend on the quality of the data behind the methodology and the transparency with which those data and methods are made available.