New GDP Series Splits Multi-Activity Firms by MGT-7 Data and Counts Rooftop Solar and Government Housing

The news

New Delhi. The Ministry of Statistics and Programme Implementation’s (MoSPI) ‘Sources and Methods’ document for the new GDP series, released last Monday, contains changes that have received little attention, The Indian Express reports. Sources and Methods is the manual that explains where each number in the national accounts comes from and how it is calculated. This magazine’s card of September 22 covered the headline changes. The report lists five that have dominated debate over the past year: the base year moving from 2011-12 to 2022-23; ‘double deflation’ to arrive at real gross value added (GVA); the use of an output Producer Price Index (PPI) and a Banking Services Price Index (BSPI) in that deflation; better estimates of the informal sector through surveys; and the expectation of no gap, or discrepancy, between annual GDP measured by production and by expenditure. Today’s report covers five other changes. The first concerns how an enterprise is classified. Take a firm that both manufactures and sells services, with a turnover of ₹100 and GVA of ₹50. In the old series its ‘major activity’ decided the matter: if ₹70 of turnover came from manufacturing, all ₹50 of GVA was counted as manufacturing. In the new series GVA is divided by share. If ₹20 of GVA comes from services, that goes to services and the rest to manufacturing. This is possible because of two forms companies file every financial year with the Ministry of Corporate Affairs: MGT-7 for public and private companies, and MGT-7A for one-person and small companies. These annual returns report financial results, management structure, shareholding and loans. Second, the value of housing that the government provides to its employees was not counted before. Employees who get House Rent Allowance already show it in their pay, but those given quarters did not. The new series values this housing service using the cost of the houses, after deducting repair and maintenance costs and the annual consumption of fixed capital (depreciation). Third, the series assumes a shorter ‘average useful life’ for several asset types: dwellings are now taken to last 60-75 years, down from 70-80 years. A shorter life means higher annual depreciation, which affects net measures such as net domestic product. Fourth, household financial savings in shares, debentures, hybrid instruments and mutual funds are now taken from the Securities and Exchange Board of India instead of the Reserve Bank of India. This adds instruments such as Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative Investment Funds. Fifth, electricity that households produce for their own use through rooftop solar panels is now counted. The ‘electricity, gas, water supply and other utility services’ sub-sector produced real GVA of ₹1.92 lakh crore in April-June 2026, 8.9% higher than a year earlier. The syllabus link is GS3 on growth, its measurement and the mobilisation of resources, including savings.

Static syllabus linkage

1. The National Statistics Office compiles national accounts under MoSPI. The National Statistics Office (NSO) was formed in 2019 by merging the Central Statistics Office and the National Sample Survey Office within the Ministry of Statistics and Programme Implementation. Its National Accounts Division publishes GDP estimates, including quarterly estimates and the annual National Accounts Statistics. The National Statistical Commission, set up in 2005 on the recommendation of the Rangarajan Commission, is the apex advisory body on statistical standards. India follows the United Nations System of National Accounts, currently the 2008 version.
2. The base year is revised so that prices and the structure of the economy stay current. Real GDP is calculated at the prices of a base year, and the weights of sectors reflect the economy in that year. As the economy changes, with new industries and new goods, an old base overstates declining sectors and misses new ones. A revision updates data sources and methods as well as prices. The earlier series used 2004-05 and then 2011-12 as the base, and the 2011-12 series was released in January 2015.
3. GVA at basic prices and GDP at market prices differ by taxes and subsidies. Gross value added is the value of output minus the value of inputs used up in production. GVA at basic prices equals GVA at factor cost plus production taxes minus production subsidies. GDP at market prices equals GVA at basic prices plus product taxes minus product subsidies. Since the 2015 revision India reports sector growth as GVA at basic prices and headline growth as GDP at market prices.
4. Double deflation and supply-use tables improve real estimates. Single deflation divides nominal GVA by one price index. Double deflation deflates output by an output price index and inputs by an input price index separately, and takes the difference, which is more accurate when input and output prices move differently. A supply-use table sets out, for each product, total supply (output plus imports) and total use (intermediate use, consumption, investment and exports). It is used to reconcile the production and expenditure estimates of GDP. The MCA-21 database of company filings, introduced in the 2011-12 series, replaced the RBI’s sample of companies as the main source for the corporate sector.

Why UPSC loves this

1. GDP methodology is a standing Prelims topic. UPSC has asked about the difference between GDP and GVA, factor cost and market price, and nominal and real values. Base-year revision, double deflation and the treatment of imputed items such as owner-occupied housing are natural statement-type questions.
2. Mains asks about the reliability of data for policy. The debate on India’s growth figures after the 2015 revision reached Mains as a question on the credibility of official statistics. The new series, and its detail on classification and savings, gives candidates material on how better data sources can address earlier criticisms.
3. Savings and investment link GDP to capital formation. The household sector is India’s largest net saver, and questions on falling household financial savings and rising physical savings have appeared. The shift of savings data from RBI to SEBI and the inclusion of REITs and InvITs is directly relevant.

Analysis

1. Activity-wise splitting will make manufacturing look different, not necessarily smaller. Many Indian manufacturers earn part of their value added from services such as software, logistics, design and after-sales support. Under the ‘major activity’ rule, all of this was counted as manufacturing. The new rule moves that portion to services, so manufacturing’s share of GVA may fall at the margin even if factory output does not change. The reverse also happens for service firms with some manufacturing. Policy debates that rely on manufacturing’s share of GDP, such as targets for a 25% share, should be read with this change in mind.
2. Counting government housing and rooftop solar reflects production that already existed. Housing provided by the government to its employees and electricity produced by households for their own use are both production that was previously not counted. The System of National Accounts treats own-account production of goods and imputed housing services as part of GDP, so including them brings India closer to the standard. The effect is small in size but important in principle, because rooftop solar will grow quickly under PM Surya Ghar and would otherwise have made recorded electricity output understate actual generation.
3. Shorter asset lives raise depreciation and lower net measures. If dwellings last 60-75 years instead of 70-80, more of their value is used up each year. Gross GDP is not affected, but net domestic product and net national income fall relative to it. Net measures are closer to sustainable income, so this is a more cautious and arguably more realistic assumption, given how buildings are actually maintained and replaced in India.
4. SEBI data will show the shift of household savings to markets. Households now invest more through mutual funds, REITs, InvITs and AIFs than the RBI’s older sources captured. Taking data from SEBI should give a fuller picture of financial savings, which have been a concern since the post-pandemic rise in household borrowing. A caution applies: any change of source creates a break in the series, so comparisons with years before 2022-23 must be made carefully and back-series data will be needed.
5. Better methods need open data and a back series. The Sources and Methods document is a step towards transparency, because users can see how estimates are built. Its credibility will depend on MoSPI publishing the underlying data, releasing a back series that links the new numbers to earlier years, and explaining revisions. The 2015 series was criticised partly because the back series came late and was disputed. The same mistake should not be repeated.

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