India’s 7.8% GDP Growth Sparks Debate as Economists Defend Revised Data

The debate intensified after former Finance Secretary of India Subhash Chandra Garg raised questions over the revision of the previous year’s first-quarter figures. Garg pointed out that the first-quarter GDP had earlier been estimated at around Rs 86 lakh crore but was subsequently revised to around Rs 80 lakh crore. He suggested that using the revised base had helped produce the 7.8% growth figure for the latest quarter.

Garg said that based on the latest GDP estimates, nominal GDP growth for Q1 was below 2.5%, far lower than the revised figure reported by the government.

The Congress subsequently questioned the methodology, including the GDP deflator and revisions under the new 2022-23 base series. The Congress claimed that the new series had reduced India’s GDP by Rs 43 lakh crore across four years.

The government rejected the charge and 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 don't even know how to compare apples with apples. They're trying to misguide the people of India [by] comparing the growth rate of an old series with a new series.”

Goyal added that GDP comparisons must be made within the same statistical series.

The questions surrounding the figures were examined during Rajdeep Sardesai’s Roundtable on GDP on India Today TV, where economists Montek Singh Ahluwalia, Surjit Bhalla and Neelkanth Mishra broadly agreed that there was no evidence of political manipulation of the GDP data. At the same time, their assessment made clear that strong quarterly growth does not mean India’s wider economic challenges have disappeared.

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 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.

India is among the world’s fastest-growing major economies, but it 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.

Mishra pointed out that India had gone roughly a decade without resetting the series. The new series 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.

Mishra also noted that when the new series was released, nominal GDP was revised down by about 4%. He said this would hardly be an obvious way for a government to manufacture a stronger economic picture.

Surjit Bhalla, former IMF Executive Director for India, questioned why the government would seek to boost GDP figures while consumption was actually lower in the new data than in the old data.

“If we wanted to boost GDP, why would we not boost consumption? Yet consumption is actually lower in the new data than in the old data,” Bhalla said.

Bhalla said he had examined the question of whether GDP figures were being artificially inflated and categorically stated, “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, also agreed that the alternative calculation of 2.6% or 2.8% growth does not stand up when different series are mixed. However, 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 over why India’s GDP has tended to be revised down, including for financial year 2025-26, when the statistical base is changed, while 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 an explanation for the downward revision. Under the old system, where detailed information on India’s large informal economy is limited, statisticians often estimate informal-sector growth by assuming that it is moving broadly in line with the formal sector.

If the informal economy grows more slowly than the formal sector, that assumption can result in an overestimate.

Mishra said a large part of the latest downward revision 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 discussion then turned to the more consequential question of whether the 7.8% first-quarter growth rate showed that India had weathered global headwinds better than expected.

After the June quarter GDP data was released, Prime Minister Narendra Modi took a dig at sceptics and said, “Doomsayers were doomed and India bloomed yet again.” He described the 7.8% growth as “exemplary” in view of the global headwinds.

Mishra said he had expected growth of around 7.5% for FY27 and therefore did not find 7.8% surprising. He argued that India 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.

He said fiscal consolidation had brought India’s general government deficit closer to pre-Covid levels, while liquidity conditions had improved and credit growth was accelerating. According to Mishra, these factors provide a stronger foundation for growth even as the global environment remains turbulent.

Ahluwalia offered a more measured assessment, saying, “You could say that the economy is more resilient than the doomsdayers were suggesting.”

He added, “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.”

However, Ahluwalia cautioned against treating one strong quarter as a reason for complacency.

“You can't look at these data and say, ‘I told you so’,” Ahluwalia said.

“We need to move from a general call for reforms to a listing of actual reforms,” he added.

The economists largely rejected the charge that the 7.8% figure was politically manufactured, while also cautioning that the number alone cannot establish that India’s broader economic challenges have been resolved.