The Hindu Editorial Analysis- 2025-12-13

A Critical Story that a Chunk of the Media Missed

Context

 The International Monetary Fund (IMF) has raised serious concerns about India's national accounts data, specifically regarding the methodology used to compile economic statistics. The IMF has given India's national accounts, which include Gross Domestic Product (GDP) and Gross Value Added (GVA), a C grade, indicating a low level of confidence in the data. 

IMF Questions India's Economic Data Accuracy

•  The recent release of India's national accounts data for the second quarter (Q2) showed a surprising growth rate of 8.2%. However, this was met with criticism from the International Monetary Fund (IMF) regarding the methodology used to compile these statistics. 
•  Despite the strong growth figure, the IMF raised concerns about the reliability of India's national accounts, including Gross Domestic Product (GDP) and Gross Value Added (GVA) figures. 

Media Coverage and IMF's Assessment

•  Media coverage of the IMF's assessment was limited, with only a few outlets reporting on it. For example, The Hindu featured it as a front-page story, while most business newspapers either ignored it or placed it in less prominent sections. 
•  The IMF's grading of India's national accounts is a serious concern, particularly about the methodology for estimating GDP. 

Methodology Concerns

•  India uses the formal organized sector as a proxy to estimate growth in the informal or unorganised sector. However, the unorganised sector, even excluding agriculture, makes up nearly 30% of GDP. 
•  This raises important questions about the reliability and accuracy of the measurement framework used for such a significant part of the economy. 

Why India's GDP Estimates Raise Reliability Concerns

 Experts Pronab Sen and Arun Kumar criticize the method of using the organised sector as a proxy for the unorganised sector in GDP estimates. This approach assumes that both sectors move in tandem, which is not the case during economic disruptions. 

•  Historical events like demonetisation, the Goods and Services Tax (GST) implementation, and the COVID-19 pandemic revealed that while the organised sector expanded, the unorganised sector contracted. This discrepancy led to an overestimation of the unorganised sector's performance. 
•  As a result, headline figures, such as the reported 8.2% quarterly GDP growth, should be interpreted with caution. Sen emphasizes that quarterly GDP estimates heavily rely on assumptions due to the lack of comprehensive real-time data. 
•  Without a robust system for collecting real-time data, concerns regarding the accuracy of GDP estimates will persist. 

Why the IMF's Concerns Are Unlikely to Be Resolved Soon

•  The IMF's concern, reflected in the low 'C' grade, is structural and cannot be fixed quickly. 
•  Although the Union Ministry of Statistics and Programme Implementation is updating the GDP base year and methodology, with a new series expected by February next year, doubts remain. 
•  The core question is whether these changes will meaningfully improve estimates of the unorganised sector. 
•  Pronab Sen is unequivocal, stating, "I don't think we can," when asked if India can adequately address the IMF's concerns. 
•  This issue matters because the media's role is to inform, analyse, and explain such critical developments. When major concerns are ignored or underplayed, citizens remain uninformed and ill-equipped to understand economic realities. 
•  Such neglect reflects a failure of journalism, an outcome that ultimately harms public discourse and accountability. 

Conclusion

 In conclusion, the concerns raised by the IMF underscore deeper structural weaknesses in India's economic data system that require substantial time and effort to address. Merely updating the methodology will not guarantee accuracy, particularly for the unorganised sector. When such critical issues are under-reported, it hampers public understanding and weakens informed debate, policy scrutiny, and the media's essential role as a watchdog. 

FTAs for a Start

Introduction

India is actively expanding its network of Free Trade Agreements (FTAs) in response to growing protectionism, the need to diversify markets, and the aim to strengthen global integration. However, past experiences indicate that simply having trade deals is not enough for success. It is crucial to address structural weaknesses, ensure sectoral readiness, and enhance exporter capabilities for sustained benefits from these agreements.

India's FTA Landscape

• India has entered into 20 regional/free trade agreements, according to the World Trade Organization.
• This count does not include recent agreements with the United Kingdom and the European Free Trade Association (EFTA).
• Ongoing negotiations involve the United States, European Union, Canada, and the Southern African Customs Union.
• India is seeking to expedite trade agreements to address high US tariffs on key exports.
• Re-engagement with the Regional Comprehensive Economic Partnership (RCEP) remains limited to consultative discussions, as India has not accepted accession after exiting in 2019 due to concerns over agriculture and rules of origin.
• True trade diversification necessitates deep structural reforms, enhanced productive capacity, and integration into global value chains.

Lessons from Earlier FTAs

• Data from the Commerce Ministry indicates that FTAs with ASEAN, Japan, and South Korea have resulted in negative trade balances for India.
• The trade deficit with ASEAN escalated from approximately $10 billion in 2017 to nearly $44 billion in 2023.
• With Japan, imports of capital-intensive, high-value goods have surpassed the growth of India's exports.
• Key shortcomings included weak negotiation of non-tariff barriers, quality standards, certifications, and rules of origin.
• FTAs were often misaligned with India's sectoral strengths, and industry consultations were insufficient.
• Limited domestic awareness resulted in Indian firms under-utilising preferences, while partner countries benefitted more from the agreements.

Course Correction and Recent Success

• Reviews of FTAs with ASEAN, Japan, and Korea have led to some policy adjustments.
• The India-UAE Comprehensive Economic Partnership Agreement (CEPA) exemplifies a more balanced approach, with non-oil trade expected to reach about $100 billion in FY25.

Strategic Focus for Future Negotiations

With the United States: Negotiations should consider inputs from exporters in services, seafood, engineering goods, and textiles.

With the European Union: Priority should be given to carbon-intensive sectors such as iron and steel and cement, particularly in light of the Carbon Border Adjustment Mechanism (CBAM).

Beyond Signing Agreements

Simply signing a trade agreement is not enough. To achieve lasting benefits, it is essential to support exporters through various means such as:

• Compliance with standards
• Upgrading infrastructure
• Adopting new technologies
• Gaining market intelligence

Without these follow-up actions, FTAs may remain under-utilised and fail to bring about transformative changes.

Conclusion

For FTAs to provide enduring benefits, India must go beyond merely signing agreements. It needs to focus on building competitive industries, aligning standards and regulations, and supporting exporters with infrastructure, technology, and market intelligence. Only a comprehensive strategy can turn trade diplomacy into sustainable economic growth.