MAINS Current Affairs includes Persistent Decline In India’s Groundwater & India’s New National Accounts Methodology

Environment

1. PERSISTENT DECLINE IN INDIA’S GROUNDWATER

Context: India’s groundwater levels are showing a persistent decline, as highlighted by the State of Global Water Resources 2025 report published by the World Meteorological Organization (WMO).

• The trend raises concerns for India’s agriculture, drinking-water security, livelihoods and long-term water sustainability.

What is Groundwater Depletion?

• Groundwater depletion occurs when the rate of groundwater extraction exceeds the rate of natural recharge through processes such as:
  • Rainfall infiltration
  • Seepage from surface water
  • Other groundwater-recharge mechanisms
• A temporary fall in the water table does not necessarily indicate long-term depletion.
• Persistent depletion occurs when there is a sustained imbalance between groundwater withdrawal and natural recharge.

India’s Groundwater Dependence

• India accounts for approximately 18% of the world’s population, while possessing only around 4% of global freshwater resources.
• This imbalance places considerable pressure on India’s freshwater systems.
• Groundwater is particularly important for:
  • Rural drinking water: Around 85% of rural drinking-water requirements depend on groundwater.
  • Irrigation: Approximately 60% of irrigation water comes from groundwater.

Key Findings of the WMO Report

• The WMO report uses 2001–2020 as the reference period for assessing groundwater conditions.
• Globally, around 34% of groundwater observation stations recorded below-normal to much-below-normal groundwater levels in 2025.
• Around 31% of observation stations recorded above-normal to much-above-normal levels, demonstrating significant regional differences in groundwater conditions.
• Northern India experienced below-normal terrestrial water storage in 2025, indicating continued stress on the region’s freshwater reserves.
• The WMO also observed a declining trend in global terrestrial water storage since 2014–2016, indicating longer-term deterioration in freshwater availability.

Drivers Behind Groundwater Decline in India

1. Over-Extraction

• Agriculture accounts for the largest share of groundwater withdrawal in India.
• Water-intensive crops such as paddy and wheat require substantial irrigation.
• In regions where natural recharge is limited, intensive groundwater-based irrigation can create a persistent gap between withdrawal and recharge.

2. Subsidised Electricity

• Free or subsidised electricity for agricultural pumping can reduce the financial incentive to conserve groundwater.
• Low pumping costs may consequently encourage excessive extraction, particularly in areas already experiencing groundwater stress.

3. Declining Natural Recharge

• Rapid urbanisation and increasing concretisation reduce the surface area through which rainwater can infiltrate into the ground.
• Wetland loss further reduces natural groundwater-recharge opportunities.
• Consequently, groundwater extraction can increasingly exceed the rate of natural replenishment.

4. Climate Variability

• Changes in rainfall patterns can adversely affect groundwater recharge.
• Factors such as:
  • Erratic rainfall
  • Longer dry spells
  • Rising temperatures
    can reduce effective recharge while simultaneously increasing irrigation requirements.

Initiatives Taken by Government

1. Jal Shakti Abhiyan

• Launched in 2019, the Jal Shakti Abhiyan focuses on water conservation and groundwater recharge, particularly in water-stressed districts.

2. National Aquifer Mapping Programme (NAQUIM)

• NAQUIM seeks to identify, map and understand India’s aquifers.
• Better knowledge of aquifer characteristics can support more scientific and sustainable groundwater management.

3. Atal Bhujal Yojana

• Atal Bhujal Yojana focuses on improving groundwater management in priority areas, particularly those containing critical and over-exploited blocks.
• It promotes more sustainable and participatory approaches to groundwater use.

4. Central Ground Water Authority (CGWA)

• The Central Ground Water Authority regulates groundwater extraction through guidelines, particularly for industrial and infrastructure-related uses.

5. Micro-Irrigation

• Water-use efficiency is promoted through micro-irrigation under programmes such as the Per Drop More Crop
• Efficient irrigation technologies can reduce water consumption while maintaining agricultural productivity.

Way Ahead

1. Manage the Entire Aquifer Balance

• Groundwater governance should move beyond merely restricting extraction.
• The focus should shift towards managing the complete aquifer balance, including:
  • Extraction
  • Natural recharge
  • Artificial recharge
  • Local water demand
  • Aquifer characteristics

2. Promote Crop Diversification

• Farmers should be encouraged to shift towards less water-intensive crops.
• Such diversification should be supported through:
  • Assured procurement
  • Appropriate price incentives
  • Agricultural infrastructure
  • Market linkages

3. Prepare Groundwater Budgets

• Groundwater budgets should be developed at the aquifer and watershed levels.
• Reliable monitoring data can help determine sustainable levels of extraction and recharge.

4. Strengthen Recharge

• Urban and rural planning should protect natural recharge areas and improve rainwater infiltration.
• Greater attention is needed towards wetlands, watersheds and other areas that contribute to aquifer replenishment.

Conclusion

• India’s dependence on groundwater makes its persistent depletion a significant challenge for water security, agriculture and rural livelihoods.
• The solution requires a transition from extraction-centred management towards aquifer-based, data-driven and demand-sensitive groundwater governance.
• Combining crop diversification, efficient irrigation, groundwater budgeting, recharge enhancement and participatory management can help India maintain a sustainable balance between groundwater use and natural replenishment.

Economy

2. INDIA’S NEW NATIONAL ACCOUNTS METHODOLOGY

Context: The Ministry of Statistics and Programme Implementation (MoSPI) released the 8th revised National Accounts Series in 2026, with 2022–23 as the new base year.

• The revised methodology introduces several methodological changes, including the adoption of double deflation in manufacturing GVA.

What are National Accounts?

• National Accounts Statistics (NAS) provide a systematic framework for measuring the economic activity of a country.
• They capture major aggregates relating to: GDP, GVA, consumption, investment, saving and external trade, following the framework of the UN System of National Accounts (SNA).

Evolution of Base Year

• India periodically revises the base year used for calculating national income and GDP.
• The principal objectives of revising the base year are to:
  • Incorporate structural changes in the economy.
  • Reflect changes in production and consumption patterns.
  • Incorporate improved and more comprehensive data sources.
  • Ensure that constant-price estimates provide a more realistic representation of the contemporary economy.
• The 2022–23 base year therefore seeks to make national-account estimates more relevant to India’s changing economic structure.

Calculation Methodology

GDP can be measured through three broad approaches:

1. Production Approach

• GDP is derived from the Gross Value Added (GVA) generated by different industries, along with:

GVA of industries + taxes less subsidies on products

2. Expenditure Approach

• GDP is calculated from expenditure on final goods and services:

Final consumption + Gross Capital Formation + Exports − Imports

3. Income Approach

• GDP is estimated through the incomes generated during production, including:

Compensation of employees + Operating surplus/Mixed income + Taxes less subsidies

• For calculating real GDP and GVA, current-price values must be adjusted for changes in prices using appropriate price deflators.

Key Change: Double Deflation in Manufacturing

• Under the earlier methodology, manufacturing’s nominal GVA was converted into real GVA largely through the use of a single aggregate price index or deflator.
• The revised 2022–23 series introduces double deflation for manufacturing.
• Under this approach, changes in the prices of outputs and inputs are adjusted separately.

How Double Deflation Works

• The methodology separately deflates:

1. Value of goods produced by manufacturers
2. Cost of inputs consumed during production

• This provides a more detailed assessment of how changes in output prices and input prices affect real manufacturing GVA.

Use of ASI and PPI Data

• MoSPI uses data from the Annual Survey of Industries (ASI) along with elementary item-level Producer Price Indices (PPI).
• These PPIs are based on ex-factory prices and are released by the Office of the Economic Adviser under DPIIT.
• The output PPI covers both final and intermediate goods.

Examples of Items Covered

The output PPI covers a wide range of commodities, including: wheat, milk, bauxite, coking coal, electricity, refined palm oil, besan, cotton yarn, sacks/gunny bags, leather, naphtha, phosphoric acid, cement and semi-finished iron and steel.

• Since many products serve as inputs for other industries, the output price of one industry can also function as an input price for another industry.

Item-Level Deflation

• Items representing approximately 80% of output and input value are selected after ranking them according to their value.
• ASI-derived weights are then used to deflate individual items separately.
• This provides greater granularity compared with applying a single broad deflator to the entire manufacturing sector.

Exclusion of Two Manufacturing Categories

• Two of the 30 manufacturing categories are excluded from the double-deflation exercise:
  • Processed food and oils
  • Pharmaceuticals
• The reason is that these sectors have relatively high imported-input shares, while direct mapping between their inputs and elementary output PPI is difficult.

Treatment of Service Inputs

• Where suitable PPIs are unavailable for service inputs, the methodology uses:
  • Consumer prices
  • Implicit deflators
• This helps address the absence of comprehensive producer-price measures for certain services.

Other Important Changes

Treatment of Defined-Benefit Pensions

• The revised series changes the treatment of defined-benefit pension schemes.
• Instead of using pension payments made to retirees as a proxy, the methodology estimates the present value of pension entitlements accruing to serving government employees.
• This provides a different approach to measuring the economic value of pension obligations within the national accounts framework.

Significance

1. More Appropriate Measurement of Real Manufacturing GVA

• Double deflation can provide a more theoretically appropriate measure of real manufacturing GVA because it separately captures changes in:
  • Output prices
  • Input prices

2. Greater Item-Level Accuracy

• Using detailed item-level price indices can improve the precision of manufacturing estimates compared with relying on a broad aggregate deflator.

3. Better Consistency Between Production and Price Data

• Greater integration of ASI data and item-level PPI data can improve consistency between production statistics and the corresponding price information.

4. Better Reflection of Economic Structure

• The revised methodology and updated base year can help national accounts better capture structural changes in India’s contemporary economy.

Concerns and Issues

1. Experimental Nature of PPI

• A major concern is that India’s Producer Price Index remains experimental.
• This raises questions regarding the robustness, consistency and long-term continuity of input-price measurement.

2. Difficulty in Mapping Inputs

• Accurately matching intermediate inputs with appropriate domestic PPIs can be challenging.
• The difficulty becomes greater for:
  • Imported inputs
  • Complex intermediate goods
  • Service inputs

3. Interpretation of Manufacturing GVA

• Because the methodology relies on detailed price adjustments, changes in real manufacturing GVA require careful interpretation.
• Manufacturing GVA estimates may therefore need to be examined alongside other indicators such as the Index of Industrial Production (IIP) rather than being interpreted in isolation.

Way Forward

• India should work towards institutionalising a comprehensive Producer Price Index (PPI).
• Key priorities should include:
  • Improving item-level price collection.
  • Strengthening ASI and administrative datasets.
  • Expanding coverage of imported inputs.
  • Improving measurement of service inputs.
  • Strengthening the quality and frequency of price data.
  • Ensuring transparent documentation of deflator methodology.
  • Periodically validating and reviewing the performance of different deflators.

Conclusion

• The revised National Accounts Series with 2022–23 as the base year represents an important methodological step towards improving the measurement of India’s economic activity.
• The introduction of double deflation in manufacturing seeks to provide a more refined estimate of real GVA by separately accounting for changes in output and input prices.
• However, the effectiveness of the new methodology will depend on the quality, coverage and reliability of India’s underlying price and production datasets.
• Strengthening the PPI framework, improving data quality and maintaining transparent methodological documentation will be essential for ensuring the credibility of India’s national accounts.

Download Pdf | Study Material | Downloads | Daily Quiz  | FREE Youtube Videos