The government’s latest GDP data has sparked a debate over the health of the Indian economy. The Opposition is questioning the accuracy of the numbers, and economists have differing takes on the revisions to earlier data and changes in the methodology used to calculate GDP growth. A debate intensified after Finance Secretary of India, Subhash Chandra Garg. But people had questions on their minds. Ace economists Surjit Bhalla, Montek Singh Ahluwalia and Neelkanth Mishra have now settled the debate.
The question gained traction after former Finance Secretary of India, Subhash Chandra Garg, pointed to a revision in the previous year’s first-quarter figures. Garg argued that the first-quarter GDP had earlier been put at around Rs 86 lakh crore but was subsequently revised to around Rs 80 lakh crore, and suggested that using the for the latest quarter.
Garg said based on the latest GDP estimates, nominal GDP growth for Q1 was below 2.5%, far lower than the revised figure now reported by the government.
The Congress then questioned the methodology, including the GDP deflator and the revisions under the new 2022-23 base series. The Congress said the new series reduced India’s GDP by Rs 43 lakh crores across four years.
The government rejected the charge and has defended the double-deflation method used to estimate output in sectors such as manufacturing and agriculture.
Union minister Piyush Goyal said, “Former finance secretary, former Reserve Bank Governor, both of whom could not complete their time in India, or in the government, . They’re trying to misguide the people of India [by] comparing the growth rate of an old series with a new series.” The minister added GDP comparisons must be made within the same statistical series.
So, are the numbers accurate? Has India’s economy become more resilient? What explains the downward revision in GDP?
On Rajdeep Sardesai’s Roundtable on GDP on India Today TV, economists Montek Singh Ahluwalia, Surjit Bhalla and Neelkanth Mishra offered a broad consensus on the first question — there is no evidence that the GDP data has been politically manipulated. But their answers also made clear that a strong quarterly growth number does not mean India’s larger economic challenges have disappeared.
First, let’s have a look at the revised numbers.
Neelkanth Mishra, Executive Director representing India at the World Bank, rejected the claim that the economy had actually grown by only 2.6% or 2.8%, saying that such a calculation compares two different statistical series.
“Economies that grow fast and have a very large informal component need to reset their base and methodology periodically. When you do that, you get new information, and overall GDP numbers can be revised up or down,” Mishra said.
It must be noted that India is among the world’s fastest-growing major economies. But India also has a large informal economy, where businesses and workers are not always captured through the same detailed records available for the formal sector. This makes periodic revisions more important.
India had gone roughly a decade without resetting the series, Mishra pointed out. The new series, therefore, uses different source data and surveys, making direct comparisons with the older series misleading.
“You cannot compare old-series data with new-series data. Not only is the methodology different, the input data itself is different. You are surveying a very different set of industries. It has to be like-for-like; otherwise, the comparison doesn’t make sense,” Mishra said.
Neelkanth Mishra noted that when the new series was released, nominal GDP was actually revised down by about 4%. That would hardly be an obvious way for a government to manufacture a stronger economic picture.
“If the government wanted to boost GDP, why would it not boost consumption? Yet consumption is actually lower in the new data than in the old data,” said Surjit Bhalla, former IMF Executive Director for India.
Bhalla said he had examined precisely the question of whether the GDP numbers were being artificially inflated. He categorically said, “There is no evidence to date that we have played politics with the numbers.”
He added that India’s national accounts statisticians are among the most conservative professionals he has encountered.
“If we wanted to boost GDP, there are several things we could have done. But consumption has actually been revised lower. At the same time, there is substantial independent evidence of an increase in investment, and investment adds to GDP,” Bhalla said.
Montek Singh Ahluwalia, former deputy chairman of the Planning Commission, agreed that the 2.6% or 2.8% alternative calculation does not stand up when different series are mixed. But he cautioned against treating the debate over revisions as completely illegitimate.
“All quarterly numbers have to be taken with a pinch of salt. They are based on preliminary information. You cannot decide from the first quarter what the growth rate for the year as a whole will be,” Ahluwalia said.
He nevertheless flagged a technical question that deserves closer scrutiny: why has India’s GDP tended to be revised down, including for financial year 2025-26, when the statistical base is changed, when some other countries have historically seen upward revisions?
“That is a relevant question,” Ahluwalia said. “When the statistics people put out the full details, economists will need to look carefully at exactly why that has happened.”
Mishra offered one explanation. Under the old system, where detailed information on India’s large informal economy is limited, statisticians often estimate informal-sector growth by assuming it is moving broadly in line with the formal sector. If the informal economy grows more slowly than the formal economy, that assumption can result in an overestimate.
A large part of the latest downward revision, Mishra said, came from services, particularly highly informal segments such as trade and hotels. The revision to services GDP was around 12% between the old and new series.
“So, you can reset the base every five years, but you don’t have detailed data every year. If the informal sector is losing share or growing more slowly than the formal sector, GDP can become overestimated. I think that was the primary reason for the downward revision,” Mishra explained.
The more consequential question raised in the discussion was whether the 7.8% first-quarter growth rate showed whether India had weathered global headwinds better than expected.
After the June quarter GDP data was released, Prime Minister Narendra Modi took a dig at the sceptics and said, “.” He called the 7.8% “exemplary” growth because of the global headwinds.
Neelkanth Mishra said he had expected growth of around 7.5% for FY27 and therefore did not find 7.8% surprising. India, he argued, entered the year after absorbing fiscal and monetary headwinds.
“Last year, we had fiscal and monetary headwinds. Think of an aircraft flying with a strong headwind. Its speed over the ground is lower. Once the headwind disappears, the aircraft starts flying faster,” Mishra explained.
So, fiscal consolidation has brought India’s general government deficit closer to pre-Covid levels, while liquidity conditions have improved and credit growth is accelerating. Those factors, he said, provide a stronger foundation for growth even as the global environment remains turbulent.
But Ahluwalia offered a more measured assessment, saying, “You could say that the economy is more resilient than the doomsdayers were suggesting,” adding, “Even if the growth rate at the end of the year turns out to be closer to 7% than 7.8%, that would still be much faster than the major developing economies.”
The caveat is that one strong quarter cannot become an excuse for complacency.
“You can’t look at these data and say, ‘I told you so’,” Ahluwalia said.
The economists largely rejected the charge that the 7.8% number was politically manufactured. But they also refused to treat the number as proof that India’s economic job is done.