Content

• Redefining Growth: India’s Revised GDP Estimates and the New Measurement Framework
• India’s Trade Partnerships Powering Global Integration and Growth

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Redefining Growth: India’s Revised GDP Estimates and the New Measurement Framework

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Why in News?

Release of Revised GDP Estimates

• On 27 February 2026, Government released revised GDP estimates, shifting base year from 2011–12 to 2022–23, incorporating major methodological reforms and expanded administrative data integration.
• Real GDP growth (FY 2025–26): 7.6%, compared to 7.1% in FY 2024–25, reflecting sustained macroeconomic resilience amid global slowdown and external uncertainties.
• Nominal GDP growth projected at 8.6% (FY 2025–26), directly influencing fiscal deficit ratios, debt-to-GDP metrics, and macroeconomic sustainability indicators.

Back-Series and Continuity

• Back-series data under revised methodology will be released by December 2026, ensuring historical comparability, continuity in long-term trend analysis, and transparency in national accounts.

Relevance

GS Paper III (Economy)

• National income accounting; Base year revision (2011–12 → 2022–23).
• Real vs Nominal GDP; GVA–GDP divergence.
• Productivity measurement; Double deflation; Supply–Use Tables.
• Debt–GDP ratio, fiscal deficit recalibration under FRBM.

Practice Question

• “Periodic GDP rebasing is not merely statistical revision but a reflection of structural transformation.” Examine in the context of India’s 2022–23 base year shift.(250 Words)

Conceptual Foundations of GDP

Meaning and Scope of GDP

• GDP measures monetary value of final goods and services produced within domestic territory during a specified accounting period, excluding intermediate goods to prevent double counting.
• Real GDP uses base-year prices to remove inflationary distortions, whereas Nominal GDP reflects current price changes alongside real output variations.

Institutional and Methodological Framework

• India compiles GDP following SNA 2008 standards, under the National Statistical Office (NSO) within the Ministry of Statistics and Programme Implementation (MoSPI) framework.
• GDP = GVA + Taxes – Subsidies, explaining divergence between GDP and Gross Value Added (GVA) during periods of fluctuating indirect tax collections.

Rationale for Base Year Revision

Structural Transformation of the Economy

• Base year revision reflects structural transformation including digital economy expansion, renewable energy growth, GST stabilization, and rising economic formalisation through EPFO and tax digitisation.
• 2022–23 selected as most recent post-pandemic normal year, avoiding distortions caused by COVID contraction (–6.6% in FY 2020–21).

Need for Periodic Rebasing

• Without periodic rebasing, outdated price structures distort real growth estimation, underrepresent emerging sectors, and miscalculate productivity improvements.
• Historical base revisions approximately every decade ensure alignment with evolving economic structure and international statistical best practices.

Key Growth and Sectoral Trends (FY 2025–26)

Aggregate Growth Performance

• Real GDP growth: 7.6%, indicating strengthening domestic demand, investment recovery, and industrial expansion supported by Production Linked Incentive (PLI) schemes.
• Nominal GDP growth: 8.6%, impacting fiscal projections, tax buoyancy calculations, and debt sustainability metrics.

Sectoral Performance

• Manufacturing recorded double-digit growth in FY 2023–24 and FY 2025–26, signalling revival in industrial output and capital formation.
• Secondary and Tertiary sectors grew above 9%, indicating broad-based expansion beyond agriculture and reinforcing services-driven growth trajectory.
• Trade, repair, hotels, transport, communication recorded 10.1% growth, reflecting revival in consumption-linked service sectors.

Methodological Reforms in the New Series

Benchmark–Indicator Framework

• Benchmark–Indicator method uses annual GDP as reference and extrapolates quarterly estimates using high-frequency indicators, aligning with IMF’s Quarterly National Accounts Manual.

Double Deflation and Granular Pricing

• Double deflation applied in manufacturing and agriculture, separately deflating output and intermediate inputs to improve real value-added estimation accuracy.
• Over 260 item-level CPI indices used for granular deflation, reducing distortion from aggregate price indices and improving sector-specific real growth measurement.

Supply–Use Table Integration

• Integration of Supply and Use Tables (SUT) eliminates statistical discrepancy through product balancing, ensuring consistency between production and expenditure approaches.

Data Modernisation and Administrative Integration

Use of GST and Surveys

• GST data enables cross-validation of corporate output, state-wise allocation of activity, and improved quarterly estimation across manufacturing and non-financial services sectors.
• ASUSE and PLFS provide direct level estimates for unincorporated enterprises and labour input validation, reducing reliance on outdated proxy extrapolations.

Real-Time Government and Consumption Data

• Public Financial Management System (PFMS) improves real-time measurement of General Government expenditure, enhancing fiscal sector accuracy.
• e-Vahan database strengthens estimation of Private Final Consumption Expenditure (PFCE) in transport services using high-frequency vehicle registration data.

Informal, Gig and Digital Economy Inclusion

Informal Sector Strengthening

• Inclusion of unincorporated enterprises enhances measurement of the informal sector, historically underrepresented due to limited data availability.
• Hired domestic workers included under household employer activities, improving representation of service-sector labour within GDP.

Digital and Multi-Activity Corporations

• Gig and platform economy contributions better captured using corporate filings and survey integration, reflecting structural digital transformation.
• Multi-activity corporations segregated using MGT-7/7A filings, improving sectoral allocation accuracy instead of principal-activity assignment.

Federal and Governance Implications

Strengthening GSDP Estimation

• NSO guidelines ensure Gross State Domestic Product (GSDP) estimates remain consistent with national accounting standards and uniform definitions.
• Reduced reliance on allocation ratios enhances direct estimation of state-level output using administrative and survey-based data.

Fiscal and Institutional Impact

• Accurate GSDP influences Finance Commission devolution, borrowing ceilings, fiscal deficit ratios, and intergovernmental fiscal transfers.
• Statistical modernization strengthens macroeconomic credibility, influencing sovereign ratings, foreign investment flows, and multilateral institutional confidence.

Macroeconomic Implications

Fiscal Metrics and Sustainability

• Rebasing may alter Debt-to-GDP and Fiscal Deficit-to-GDP ratios, affecting consolidation targets under the FRBM framework.
• Nominal GDP recalibration influences tax buoyancy ratios and medium-term fiscal projections in Union Budget planning.

Growth and Productivity Assessment

• Improved measurement of manufacturing productivity enhances accuracy of potential growth and output gap calculations.
• Administrative data integration improves evidence-based policymaking and strengthens counter-cyclical macroeconomic management.

Challenges and Limitations

Data and Coverage Issues

• Informal sector estimation remains partially survey-based, limiting complete real-time measurement of micro and small enterprise activity.
• GST threshold exemptions exclude smaller firms, potentially understating output in retail and service segments.

Broader Developmental Gaps

• GDP excludes inequality, unpaid care work, and environmental degradation, limiting comprehensive welfare assessment.
• Uneven capacity across state Directorates of Economics and Statistics (DES) affects uniform GSDP compilation.

Way Forward

Transparency and Standards

• Publish detailed “Sources and Methods” documentation to enhance transparency and strengthen trust in national accounts.
• Transition to SNA 2025 standards by 2029–30 to maintain international comparability and methodological modernization.

Sustainability and Institutional Strengthening

• Develop Green GDP and satellite environmental accounts to integrate sustainability into national income measurement.
• Strengthen state statistical capacity through digital integration, training, and standardized real-time data reporting systems.

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India’s Trade Partnerships Powering Global Integration and Growth

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Why in News?

Trade Diplomacy Accelerates in 2026

• In FY 2025–26, India concluded FTAs with the United Kingdom, Oman and New Zealand, finalised the landmark India–EU FTA, and launched negotiations with GCC and Israel.
• According to UNCTAD Trade and Development Report 2025, India ranks 3rd among Global South economies in trade partnership diversity index, surpassing all Global North economies.
• India concluded negotiations for the “Mother of All Deals” — the India–EU FTA in January 2026, marking one of its most strategic economic agreements.

Relevance

GS Paper II – International Relations

• Trade diplomacy as economic statecraft.
• India–EU, UK, GCC, Israel: strategic balancing in multipolar order.
• Diversification reducing overdependence on single markets (China+1, Europe+1).

GS Paper III – Economy

• FTAs and export-led growth strategy.
• Global Value Chain (GVC) integration.
• Labour-intensive exports revival.
• Services trade liberalisation (Mode 1–4).
• Investment-linked trade agreements (EFTA).

Practice Question

• Evaluate the impact of India’s new-generation FTAs on manufacturing competitiveness, employment generation and integration into global value chains.(250 Words)

India’s Rising Trade Integration

Expanding Global Trade Footprint

• India has steadily increased its global trade share, supported by resilient services exports, diversified merchandise exports, and expanding participation in global value chains (GVCs).
• Trade partnership diversification enhances resilience against tariff uncertainties, geopolitical fragmentation, and supply-chain disruptions in an increasingly multipolar global economy.
• FTAs strengthen reliable market access, reduce non-tariff barriers, promote investment flows, and improve integration into global production networks.

India–EU Free Trade Agreement (2026)

Market Access and Tariff Liberalisation

• EU provides preferential access across 97% of tariff lines, covering 99.5% of trade value, while allowing India policy flexibility for sensitive sectors.
• 70.4% of tariff lines, covering 90.7% of India’s exports, receive immediate duty elimination, benefiting labour-intensive sectors like textiles, leather, gems, and marine products.
• Zero duty over 3–5 years applies to 20.3% tariff lines, while 6.1% tariff lines receive preferential access through tariff-rate quotas and reductions.

Sectoral and Services Gains

• Labour-intensive exports exceeding ₹2.87 lakh crore (USD 33 billion) gain competitiveness and deeper integration into European value chains.
• EU extended commitments across 144 service subsectors, including IT/ITeS, education, professional and business services, supporting high-value service exports.

India–UK Comprehensive Economic and Trade Agreement (CETA)

Goods and Trade Expansion

• 99% of India’s exports receive duty-free access, covering nearly 100% of trade value, benefiting textiles, engineering goods, chemicals, and auto components.
• Bilateral trade currently stands at USD 56 billion, with both countries targeting doubling trade by 2030 under CETA framework.

Mobility and Social Security

• UK eased mobility for professionals in IT, healthcare, finance and education, facilitating smoother entry for contractual suppliers and intra-corporate transferees.
• Double Contribution Convention eliminates dual social security payments, generating estimated savings of over ₹4,000 crore for Indian firms and professionals.

India–Oman CEPA (2025)

Market Access and Sectoral Gains

• Oman grants zero-duty access on 98.08% tariff lines, covering 99.38% of India’s exports by value, boosting agriculture, textiles, engineering and pharmaceuticals.
• Agreement enhances opportunities for MSMEs, artisans, women-led enterprises, and labour-intensive industries across manufacturing and agriculture.

Services and AYUSH Recognition

• Oman extended commitments on traditional medicine across all modes of supply, marking first such recognition globally for India’s AYUSH sector.
• Mode 4 commitments enable temporary entry for intra-corporate transferees, business visitors, and independent professionals.

India–New Zealand FTA (2025)

Comprehensive Tariff Elimination

• New Zealand eliminated duties on 100% of tariff lines, granting immediate zero-duty access for all Indian exports.
• Agreement strengthens market access for farmers and MSMEs, supporting integration into Oceania and Pacific Island markets.

Investment and Workforce Cooperation

• Backed by USD 20 billion investment commitment over 15 years, enhancing long-term economic and strategic cooperation.
• Expands workforce mobility in sectors like IT, healthcare, engineering, AYUSH, education, construction and hospitality services.

India–EFTA TEPA (Effective October 2025)

Market Access and Investment Commitments

• EFTA offered access on 92.2% tariff lines, covering 99.6% of exports, including 100% coverage of non-agricultural products.
• Investment commitment of USD 100 billion over 15 years, expected to generate 1 million direct jobs, excluding foreign portfolio investments.

Services and Capacity Building

• Strengthens cooperation in IT, education, business, cultural and audio-visual services, deepening India’s high-value services exports.

India–UAE CEPA (2022)

Trade Growth Impact

• Bilateral trade surpassed USD 100 billion in FY 2024–25, achieving earlier five-year target ahead of schedule.
• Non-oil exports reached USD 27.4 billion in FY 2023–24, growing at average 25.6% since CEPA implementation.

Sectoral Highlights

• Smartphones exports to UAE reached USD 2.57 billion in FY 2023–24, alongside growth in chemicals, machinery, and high-technology goods.
• CEPA empowered MSMEs, strengthened supply chains, and enhanced India’s strategic economic footprint in the MENA region.

India–Australia ECTA (2022)

Tariff Liberalisation and Services

• Australia granted preferential access across 100% tariff lines, while India extended access on over 70% tariff lines, particularly raw materials.
• Australia offered commitments across 135 service subsectors, granting MFN treatment in 120 subsectors.

Trade Gains

• India’s exports to Australia grew by 8% in FY 2024–25, with strong gains in manufacturing, chemicals, textiles, and agricultural products.
• Gems and jewellery exports rose 16% during April–November 2025, reflecting sustained sectoral momentum.

Domestic Enablers Strengthening Export Competitiveness

Digital and Financial Support

• Trade Connect ePlatform provides tariff explorer services enabling exporters to leverage FTA benefits effectively.
• Export Promotion Mission (EPM) establishes digitally driven framework for enhancing export initiatives and global outreach.
• Credit Guarantee Scheme for Exporters ensures liquidity support during uncertainty, promoting business continuity and market expansion.

RBI and Regulatory Measures

• RBI extended export credit tenor to 450 days until 31 March 2026, enhancing working capital flexibility.
• Export realisation period extended from 9 months to 15 months under FEMA amendments.
• Union Budget 2026–27 removed ₹10 lakh courier export cap and enabled direct factory-to-ship clearance using electronic sealing.

Expanding Negotiation Agenda

New and Ongoing Negotiations

• India reached interim framework understanding with the United States for advancing a broader Bilateral Trade Agreement (BTA).
• First round of India–Israel FTA negotiations concluded in February 2026, focusing on fintech, AI, pharmaceuticals, defence, and space cooperation.
• Negotiations underway with GCC, ASEAN, Mexico and Canada, targeting enhanced trade, investment flows, and supply-chain resilience.

Strategic and Economic Significance

Growth and Employment Effects

• FTAs expand export markets, stimulate investment inflows, create employment across manufacturing and services sectors, and deepen integration into global value chains.
• Diversified trade partnerships reduce vulnerability to concentrated markets and enhance resilience against geopolitical and tariff shocks.

Geopolitical and Strategic Dimensions

• Expanding FTA network positions India as a central actor in evolving global trade architecture anchored in trust, reciprocity, and shared prosperity.
• Trade diplomacy complements strategic partnerships across Indo-Pacific, Europe, MENA and Africa, reinforcing India’s economic statecraft.

Way Forward

Deepening Integration

• Accelerate implementation of concluded FTAs to maximise utilisation rates and ensure MSMEs effectively leverage preferential market access.
• Strengthen logistics infrastructure, customs digitalisation, and regulatory harmonisation to reduce trade costs and improve export competitiveness.

Long-Term Strategic Alignment

• Align trade strategy with Make in India, PLI schemes, and supply-chain diversification goals.
• Ensure balance between market access commitments and safeguarding sensitive agricultural and dairy sectors.

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