NEW DELHI: The debate over the quality of India's national income accounts is "ill informed", as the 'C' rating assigned by the International Monetary Fund (IMF) reflects the use of the 2011-12 base year for GDP estimation rather than any broader data shortcomings, finance minister Nirmala Sitharaman said on Wednesday. A new base year will be adopted from 27 February 2026, she added.

Replying to the Lok Sabha debate on the Central Excise (Amendment) Bill, 2025, the minister said the IMF has recognized India's macroeconomic stability and resilience and has projected 6.6% economic growth for 2025-26.

IMF did not question India's growth figures, Sitharaman said, adding that there is "no misleading data".

Her comments came after the opposition Congress party flagged the IMF's data adequacy assessment of India's national accounts following the release of the 8.2% gross domestic product (GDP) growth figure for the second quarter. The IMF's assessment was part of the annual country report released on 26 November.

The report noted that despite external headwinds, India's growth is expected to remain robust, supported by favourable domestic conditions. "Under the baseline assumption of prolonged 50% US tariffs, real GDP is projected to grow at 6.6% in FY2025/26 before moderating to 6.2% in FY2026/27," the IMF had said.

Sitharaman clarified the IMF's assessment after Nationalist Congress Party MP Supriya Sule raised the issue during the debate. The Lok Sabha on Wednesday approved the Central Excise (Amendment) Bill, 2025.

"The debate was very ill informed. Most of IMF's report focuses on India's overall healthy economic performance," the minister said.

She explained that the IMF classifies data adequacy as A, B, C or D. A indicates data is adequate for surveillance; B reflects some shortcomings but broadly adequate; C means shortcomings can somewhat hamper surveillance—the assessment given to India's national accounts—and D indicates serious shortcomings.

The IMF report also recognizes growth in private consumption, macroeconomic stability and the resilience of the Indian economy as key growth drivers, Sitharaman said. It also noted that "inflation is well below the RBI's tolerance band of 2-6% and they is expected to be 4.3% for this year," Sitharaman said.

"The C rating was based on an outdated base year, which 2011-12. But the government of India is now changing it and from next year, we will have 2022-23 as the base year. From 27 February, 2026, this will come into execution," the minister said.

On that date, the ministry of statistics and programme implementation will release the second advance estimates of GDP for FY26 and the quarterly GDP estimates for the December quarter of FY26.

On 28 November, opposition leader Jairam Ramesh said in a social media post, "It is ironic that the quarterly GDP numbers have been released very soon after an IMF report gave the second-lowest grade of C to India's national accounts statistics in its annual assessment of the Indian economy."

Central Excise (Amendment) Bill, 2025

Sitharaman said the excise duty to be levied on tobacco and tobacco products under the Central Excise (Amendment) Bill, 2025, will flow into the Centre's divisible pool of taxes, which is shared with states.

She noted that the Centre had reduced excise duty on tobacco at the time of the GST rollout in 2017 to facilitate levy of the goods and services tax (GST) compensation cess, whose proceeds were used to offset states' revenue losses in the initial years of GST.

The compensation cess was to be collected for five years up to 2022, but its collection continued because the GST Council extended it until the funds borrowed to compensate states during the pandemic were repaid, she said.

The Centre had conceded some excise duty rights to the GST Council for introducing the compensation cess, and now that the cess is being discontinued, the excise duty is being restored to the Centre, the minister explained.

"This is not a new law; this is not an additional tax; this is not something the Centre is taking away…It is coming back to the Centre, to be collected as excise duty, which will go to the divisible pool. It is going to be redistributed again," the minister said, adding that 41% of the Centre's divisible pool of tax revenue will go to the states under the Finance Commission formula.

She clarified that this was not a cess but excise duty.

"Certainly, we do not want cigarettes to be affordable," Sitharaman said, adding that price or tax had to act as a deterrent to tobacco use. Tax incidence on cigarettes is about 53% of retail price in India, lower than in countries such as the UK and Australia, she noted.

NCP MP Supriya Sule urged the government to address the problem of surrogate advertising by tobacco manufacturers.

Some parliamentarians said harsher measures such as banning tobacco use were required, while others warned that higher excise duty would hurt tobacco farmers.

Sitharaman said tobacco farmers must gradually be shifted to alternative crops. Such efforts had been made earlier and continue under the current government, she said, responding to concerns that excise duty increases would affect farmers engaged in tobacco cultivation and bidi rolling.

Abdul Rashid Sheikh, an independent MP from Jammu and Kashmir, said high taxes do not effectively curb substance abuse and argued that only a total ban works. He also urged the government to "make India free from addictions."

"What will happen to tobacco farmers in Maharashtra? Excise duty hits the procurement price of people engaged in bidi rolling. Their income will get affected as demand falls. Does the government want to generate revenue by taking from farmers' pockets? Tobacco and bidi are most used by the poor and the less educated people," said Vishaladada Prakashbapu Patil, Independent MP from Sangli in Maharashtra.

"If you really care about public health, ban it," Patil said.