NEW DELHI: The debate over the quality of India’s national income accounts is “ill-informed” because the International Monetary Fund’s (IMF) “C” rating reflects the use of the base year 2011-12 to estimate GDP rather than any broader data flaws, Finance Minister Nirmala Sitharaman said on Wednesday. The new base year will be adopted from February 27, 2026, she added.
Responding to the debate in the Lok Sabha on the Central Excise Bill, 2025, the minister said that the IMF has recognized India’s macroeconomic stability and resilience and is forecasting 6.6% economic growth for 2025-26.
The IMF did not dispute India’s growth figures, Sitharaman said, adding that there was “no misleading data”.
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Her comments came after the opposition Congress party flagged the IMF’s assessment of the adequacy of India’s national accounts data after posting 8.2% second-quarter gross domestic product (GDP) growth. The IMF assessment was part of the annual country report published on 26 November.
The report noted that despite external headwinds, India’s growth is expected to remain strong, supported by favorable domestic conditions. “Under the baseline assumption of extended US tariffs of 50%, real GDP is expected to grow by 6.6% in FY2025/26 before easing to 6.2% in FY2026/27,” the IMF said.
Sitharaman clarified the IMF’s assessment after Nationalist Congress Party MP Supriya Sule raised the issue during a debate. The Lok Sabha on Wednesday passed the Central Excise (Amendment) Bill, 2025.
“The debate has been very ill-informed. Most IMF reports focus on India’s overall healthy economic performance,” the minister said.
She explained that the IMF classifies the adequacy of data as A, B, C or D. A means that the data are sufficient for surveillance; B reflects some shortcomings, but basically adequate; C indicates that the deficiencies may somewhat hinder surveillance—the rating given to India’s national accounts—and D indicates severe deficiencies.
The IMF report also recognizes private consumption growth, macroeconomic stability and the resilience of the Indian economy as key drivers of growth, Sitharaman said. It also noted that “inflation is well below the RBI’s tolerance band of 2-6% and is expected to be 4.3% for this year, Sitharaman said.
“The C rating was based on the outdated base year which is 2011-12. But the Indian government is now changing it and from next year we will have 2022-23 as the base year. It will come into effect from February 27, 2026,” the minister said.
On this date, the Department of Statistics and Program Implementation will release the FY26 second preliminary GDP estimates and quarterly GDP estimates for the December quarter of FY26.
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On 28 November, opposition leader Jairam Ramesh said in a post on social media: “It is ironic that the quarterly GDP numbers were released very soon after the IMF report gave India’s national accounts statistics the second-lowest C grade in its annual assessment of the Indian economy.”
The Central Excise (Amendment) Bill, 2025
Sitharaman said the excise tax to be collected on tobacco and tobacco products under the Central Excise Bill, 2025, will flow into the Centre’s divisible tax fund, which is shared with the states.
She noted that the Center had reduced the excise duty on tobacco at the time of the GST rollout in 2017 to facilitate the collection of goods and services tax (GST) compensation, the proceeds of which were used to offset the revenue losses of states in the early years of GST.
The compensatory cess was supposed to be collected for five years till 2022, but its collection continued as the GST Council extended it until the funds borrowed to compensate states during the pandemic are repaid, she said.
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The Center conceded some excise rights to the GST Council for the introduction of the compensatory tax and now that the tax has ended, the Centre’s excise duty is restored, the minister explained.
“This is not a new law, it is not an additional tax, it is not something that the Center will take away…It is going back to the Center to be collected as an excise tax that will go into a divisible fund. It will be redistributed again,” the minister said, adding that 41% of the divisible fund of the Centre’s tax revenue would go to the states as per the Finance Commission formula.
She clarified that this is not a tax, but a consumption tax.
“Of course we don’t want cigarettes to be affordable,” Sitharaman said, adding that the price or tax must act as a deterrent to tobacco use. The tax impact on cigarettes in India is about 53% of the retail price, which is lower than countries like the UK and Australia, she noted.
NCP MP Supriya Sule urged the government to address the issue of substitute advertising by tobacco manufacturers.
Some MPs said tougher measures such as a tobacco ban were needed, while others warned that a higher excise duty would hurt tobacco farmers.
Sitharaman said that tobacco farmers must gradually switch to alternative crops. Such efforts have been made earlier and are continuing under the current government, she said in response to concerns that the increase in excise duty would affect farmers engaged in tobacco cultivation and bidi packing.
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Abdul Rashid Sheikh, an independent MP from Jammu and Kashmir, said high taxes were not effective in curbing drug abuse and argued that only total prohibition worked. He also urged the government to “free India from addiction”.
“What will happen to tobacco farmers in Maharashtra? Excise tax will hit the cost of bidi sellers. Their income will be affected by the drop in demand. Does the government want to generate revenue by taking from farmers’ pockets? Tobacco and bidi are mostly used by poor and less educated people,” said Vishaladada Prakashbapu Patil, an independent MP from Maharashtra Sangli in Maharashi.
“If you really care about public health, ban it,” Patil said.
