IMF Article IV assessment
Context
The IMF assigned India a ‘C’ grade for national accounts statistics, the second-lowest grade.
A ‘C’ implies significant issues in data quality that hamper effective economic surveillance.
National accounts include GDP, GVA, sectoral output, investment, consumption, and export performance. Any distortion affects policymaking, fiscal planning, and monetary calibration.
This rating places India in the same group as China, which has long been criticised for opacity in economic statistics.
Components of national accounts
Macro aggregates
GDP (Gross Domestic Product)
GVA (Gross Value Added)
National income, disposable income, saving, and capital formation
Sectoral metrics
Output, value added, employment estimates for sectors such as
Agriculture
Manufacturing
Construction
Trade and services
Financial sector
These help understand which sectors drive growth or lag behind.
Investment measures
Gross fixed capital formation
Changes in inventories
Public vs private investment
Sector-wise investment trends
These metrics show how much the economy is building capacity for future growth.
Consumption (consumer spending)
Private final consumption expenditure
Government consumption
These reflect domestic demand, a key driver in India’s economy.
External sector indicators
Exports of goods and services
Imports of goods and services
Net exports contribution to GDP
Currently important because exports influence:Manufacturing revival
Employment
Balance of payments stability
Persistent issue: outdated base year (2011–12)
The base year for national accounts, IIP, and CPI remains 2011–12.
An outdated base year fails to reflect structural changes, digitalisation, consumption shifts, and new sectors.
IMF explicitly stated that India’s CPI received ‘B’ instead of ‘A’ because its base year is old.
CPI’s heavy food weightage + outdated base = poor capture of actual inflation trends, which affects RBI’s monetary policy decisions.
Impact on policymaking
Poor data → misleading picture of investment, consumption, exports, and sectoral performance.
Incorrect inflation measurement → suboptimal monetary policy stance.
National accounts inaccuracies → hindered targeted welfare design, productivity analysis, fiscal allocations.
Informal sector challenge
The informal sector is difficult to capture due to unregistered, cash-based operations.
Yet it forms a major share of employment and output.
Underestimation distorts:
actual GDP size and growth
understanding of household welfare
labour market realities
Thus, improving informal sector measurement is essential for credible macroeconomic statistics.
Ongoing reforms (due in early 2026)
Government is updating:
national accounts base year
CPI methodology + base
IIP base
Proposed changes include:
integration of GST data for improved coverage of enterprises
refined corporate data from MCA-21
These are expected to improve reliability, reduce revision cycles, and address long-standing gaps.
IMF’s grading scale for data quality
The IMF evaluates a country’s statistics on a four-tier scale:
A – Data fully adequate for IMF surveillance.
B – Data broadly adequate with some shortcomings but generally usable.
C – Data have shortcomings that somewhat hamper surveillance.
D – Data have serious shortcomings that significantly hamper surveillance.
This scale applies to statistical categories like national accounts (GDP, GVA), prices (CPI), government finance stats, external sector stats, and monetary/financial data.
IMF Category | Grade | Implication |
National accounts (GDP, GVA) | C | Some shortcomings that somewhat hamper surveillance |
Prices (CPI), government finance, external & monetary stats | B | Broadly adequate despite limitations |
Overall statistical system | B | Generally adequate with some room for improvement |
IMF Article IV assessment
What is Article IV?
Article IV refers to Article IV of the IMF’s Articles of Agreement, which legally mandates the IMF to conduct annual surveillance of the economic and financial policies of each member country.
Every IMF member, including India, must undergo this review once a year.
Prelims Practice MCQs
Q. National accounts in India include which of the following components?
GDP and GVA
Sector-wise output and value-added estimates
Measures of investment and consumer spending
External sector performance such as exports
Select the correct answer:
A. 1 and 2 only
B. 1, 2 and 3 only
C. 2, 3 and 4 only
D. 1, 2, 3 and 4
Correct answer: D
Explanation: National accounts comprise macro aggregates (GDP, GVA), sectoral metrics, investment/consumption data, and external sector indicators such as exports and imports.
Q. Which of the following are included under “measures of investment” in national accounts?
Gross fixed capital formation
Changes in inventories
Household financial savings
Net foreign assets
Select the correct answer:
A. 1 and 2 only
B. 1, 2 and 3 only
C. 1 and 4 only
D. 1, 2 and 4 only
Correct answer: A
Explanation: Investment in national accounts mainly includes gross fixed capital formation and changes in inventories. Household financial savings and net foreign assets are separate components in macroeconomic accounts.