Explained: Why IMF downgraded India's GDP data to Grade C

The International Monetary Fund formally downgraded India’s data-quality rating in its 2025 Article IV report, assigning a ‘C’ grade to the country’s national accounts. The decision marks a decisive public judgement on weaknesses that critics — inside India and abroad — have been warning about for nearly a decade. 

The downgrading coincides with plans by the Ministry of Statistics and Programme Implementation (MoSPI) to publish a rebased GDP and related series with base year 2022-23 in early 2026. Many believe this is the moment to correct longstanding structural gaps that have warped India’s growth narrative.

C is the second-lowest grade the IMF can give. However, the grade is not a "downgrade" of the economic forecast itself, but rather an assessment of the credibility and methodology of the data collection and reporting processes used by Indian statistical agencies.

Recent macro numbers show growth, but IMF cautions

According to the IMF press release, India’s real GDP grew by 6.5 % in FY2024/25 and by 7.8 % in the first quarter of FY2025/26. 

The Fund projects growth at 6.6 % in FY2025/26 and 6.2 % in FY2026/27 under baseline assumptions — down from the 9.7 % recorded in FY2021/22 and 7.6 % in FY2022/23. 

Meanwhile, the services sector’s share of gross value-added remains high. According to official sources, services contributed about 55 % of GDP in FY2025. On these surface numbers, India remains fast-growing among large economies. But the IMF warns that headline growth masks deep structural and data-collection issues that reduce confidence in the accuracy of long-term trends. 

What the IMF’s ‘C’ grade highlights

The Fund’s critique bundles long-standing methodological and structural concerns:

Outdated base year and poor reflection of structural shift: The current GDP series still rests on the 2011-12 base year. Over more than a decade, India’s economy has changed — digital services, gig economy, fintech, platform-based commerce, renewables, informal services — but the base and price weights have not caught up. The IMF says this undermines comparability. 

Weak coverage of the informal/unorganised sector: A large part of the Indian workforce remains in unorganised or informal employment. Independent research estimates that a vast majority — historically up to 85-90 % — of the workforce lies in the informal segment, raising questions whether official value-added estimations adequately capture their output. 

Reliance on the wholesale price index (WPI) rather than producer or sector-wise price indices for deflation: Using the WPI can distort real growth estimates, especially when price and inflation dynamics vary significantly across sectors. The IMF highlights this as a major data weakness. 

Discrepancies between production-side and expenditure-side GDP calculations: Inconsistencies between different approaches to measuring GDP suggest underlying data gaps or methodological mismatches. This raises doubts about the robustness of the official series. 

Lack of seasonally adjusted quarter-by-quarter data: Without seasonal adjustment, short-term trends become harder to interpret meaningfully, which complicates economic surveillance, policymaking and short-term forecasts. The IMF again flags this as a deficiency. Thus, the ‘C’ grade does not just reflect a single error but accumulated structural and statistical deficits that have persisted for years.

Why criticism has taken so long to surface publicly

The statistical frailties flagged by the IMF are old. The delayed public alarm has three interlinked reasons:

Institutional reliance on official data: The IMF must base its global forecasts on data supplied by member countries. It cannot reject official statistics altogether; instead, it flags concerns through footnotes and caveats, which often remain out of public view.

Evolution rather than abrupt failure: The original 2011-12 rebasing appeared as a technical upgrade — new base year, modern corporate databases (like MCA-21), updated sectoral weights. Given that the method aligned with international norms, initial scepticism was modest. Doubts surfaced gradually as empirical mismatches and macro-shocks (demonetisation, GST, pandemic) exposed hard-to-capture informal output declines.

Incremental articulation over multiple cycles: Over successive Article IV consultations, the IMF raised similar concerns — about informal sector coverage, price indices, data gaps — but only in 2025 did it translate those into a formal data-quality downgrade.

In effect, what appears as a sudden public critique is actually the maturation of an undercurrent of institutional caution built over the years.

Why timing matters now

Several converging factors make the 2025 downgrade particularly significant:

The government plans to release a rebased GDP series (base year 2022-23) in 2026 that will become the new benchmark for growth and historical comparison. That makes the present IMF critique relevant for calibrating expectations from the new series.

Recent official growth numbers — 6.5 % in 2024/25, 7.8 % in Q1 FY2025/26 — remain impressive. But without methodological transparency, high valuations may continue to mask structural fragilities.

The services-dominated economy (≈ 55 % of GDP) and rising formalisation further shift the burden of accurate statistics onto price indices, informal-sector coverage, sectoral classification and robust corporate data. Failing that, future growth claims may remain vulnerable to criticism.

What needs to be done for credible GDP statistics

Any revamped statistical system — including the new 2022-23 base year series — must address multiple long-standing deficiencies:

Expand coverage of the informal/unorganised economy through frequent household and enterprise surveys rather than relying solely on corporate databases.

Introduce producer-price indices and sector-wise price deflators instead of the wholesale price index to reflect actual inflation across sectors better.

Provide a seasonally adjusted quarterly GDP series to allow short-term trend analysis.

Make the methodological notes for revisions, corporate-data weighting, price-index construction and treatment of unincorporated firms public.

Reconcile production-side and expenditure-side GDP calculations, with transparent documentation of adjustments and assumptions.

Only such thorough, transparent reform can restore confidence — from domestic analysts, foreign investors and multilateral agencies alike — in India’s growth statistics.