India’s GDP data, new methodology & the arguments: CEA V Anantha Nageswaran on CutTheClutter

In this special edition, CEA joins Editor-In-Chief Shekhar Gupta & debunks the ‘fudged data’ claim, adds the numbers for Q1 FY27 reflect the underlying vigour of Indian economic activity.

The Ministry of Statistics and Programme Implementation (MoSPI) released the GDP data this week, which said that India’s economy grew 7.8 percent in the first quarter of FY 2026-27.

The growth numbers have sparked a big fight, with critics and Opposition claiming that the estimates are inflated.

In this special edition of CutTheClutter, Chief Economic Adviser Dr V. Anantha Nageswaran joins ThePrint Editor-In-Chief Shekhar Gupta and debunks the ‘fudged data’ claim. He also explains the new way of calculation, and reiterates that numbers are not being used in any way to inflate the growth estimates. He adds that the growth numbers for first quarter reflect the true underlying vigour of Indian economic activity.

Here’s the transcript, edited for clarity:

SG: A big fight has broken out, or shall we call it a kerfuffle, our favourite word from the past. And this time, it is over the quarterly growth figures. The Modi government has reported that the growth figure for the first quarter, growth figure for each quarter comes with a two month lag.

This is the quarter of April-May-June. That is at 7.8 percent. Opposition are calling it statistical gymnastics. Also, former finance secretary Subhash Chandra Garg has appeared on TV channels, saying that this is wrong. He has put some figures on the table.

He said this growth, if at all, is just 2.6%. It is not 7.8%. That 7.8% number is a fix.

Last year, that is for the financial year 2025-26, for the first quarter, the Modi government reported that the total economic activity in India or the total GDP output in that quarter, one quarter, was Rs 86 trillion—precisely Rs 86.05 trillion. They came out with the new base year for GDP calculation. The earlier base year was 2011-12, now it has been shifted to 2022-23. With that, Q1 FY 2025-26 figure of Rs 86.05 trillion has been downrated, or has been reduced to Rs 80 trillion—exactly Rs 80.44 trillion as we stand now, because this keeps getting revised. 

So at this point, the Q1, the corresponding quarter to what is in dispute right now. The argument is that Modi government reduced last year’s GDP from Rs 86.05 trillion to Rs 80.44 trillion, so that this year’s, the same quarter, corresponding quarter’s GDP in comparison would look better.

If you compare this quarter’s GDP, which is Rs 88.27 trillion, with Rs 80.44 trillion of last year’s corresponding quarter, you get a growth of nearly 10.3%. But if last year’s corresponding quarter had stayed at Rs 86.05 trillion, which was the original, then 88.27 over 86.05 will only yield you 2.8% growth. That is the argument that there is a fix.

The fact we also need to note is that this base year revision actually did not dress up the figures for Modi government. It actually dressed them down. The size of India’s GDP overall went down for FY 2025-26, which went considerably lower than it would have been under the old base year formula.

Even if you accept the 7.8% growth figure, there are problems. And for that, I will comment on Bidisha Bhattacharya’s column.

People’s household spending is not growing. Gold buying is also coming down, although the Prime Minister is telling households to buy even less gold.
In three out of four quarters, economic growth has been 7.8% or above. Preceding quarters, it peaked at 8.6%. That is the fourth quarter of last year. But the consumer is not spending. In fact, barring a spike after 22 September last year. That’s the day when new GST cuts came into place. After that, India saw some kind of a boom. But it was temporary.

However, this is now levelling out. This graphic tells you how this 7.8% growth breaks up. Out of this 4.92, of the 7.8, or 63% comes from tertiary sector.
The basic takeaway is that consumer spending, household spending is not keeping up with this economic growth. Is this then sustainable?

At this point, I shall turn to Chief Economic Adviser Dr V. Anantha Nageswaran in New York. He’s currently in the US for the G20 Finance Minister and Central Bankers Meeting. The Finance Minister has also been there. He’s found time to join us.

Anantha, there are some things that are now lost in TV arguments. TV arguments, and what Sergio Gor just described as usually 12 heads talking over each other all at the same time, and nobody figuring out what’s happening. My challenge is that, since I am economics illiterate, I have to figure out what these figures and data mean.

The first question I ask you… which can be a basic question that’s now been raised about the government reducing last year’s Q1 overall GDP output to Rs 80 trillion from Rs 86 trillion. That’s a reduction of Rs 6 trillion. This year’s Q1 compares. not with the Rs 86 trillion that was the original projection for last financial year, but against Rs 80 trillion.

If you take it against the original of 86, then the growth is just about 2.8%. That’s what also the former finance secretary, Subhash Garg, has been saying on TV channels. Now, mathematically that makes sense. But we also know that this reduction has been made as part of the process of rebasing, finding a new base for GDP calculations.

The new base now is 2022-23. Please help us make sense of this reduction in Q1 GDP output for last year, 2025-26.

VAN: Thank you, Shekhar…you actually have partially answered the question yourself. You are right that Rs 86 lakh crore, the GDP estimate in nominal terms or current prices as they call it for FY 2025-26 first quarter, April-June, is now lower at 80. And this year, the first quarter number is 88. So that gives you something like a 10% growth. If it was 86, it would be 2-point-something percent growth is the argument.

Now, that Rs 86 lakh crore was an estimate given under the old GDP base year under the old series. If you really want to compare 86 with something, you don’t cherry pick. If you want to compare 86 that belongs to the base year 2011-12 series, then please estimate the same metric for the 26-27 first quarter under the same base year. And then you compare that number and say what the growth rate is. That would be at least somewhat defensible.

But now what they are doing is they are taking the 2011-12 number of 86, and comparing the 88 lakh crores, which is now devised, now compiled under the 22-23 base year and saying that the true GDP growth rate in nominal terms is 2-point-some percent.

That’s not correct. You are cherry picking the number that you want. Either you stay consistent with the 2011-12 base year of both 25-26 first quarter and 26-27 first quarter, or we go by what the government, what the Ministry of Statistics has given, which is to basically show the numbers for last year and this year first quarter on the same basis, same platform on the 22-23 base year.

Now, these revisions happen. In fact, India is one of the few countries that have actually, when they shifted from 11-12 to 22-23, has actually brought down the size of the economy from 357 lakh crores under the old estimate to 346 lakh crores. So, we are not trying to use the numbers to bump up estimates one way or the other.

This is what we get when we improve our data collection, introducing producer price index instead of just using wholesale price index, instead of using one price index to adjust every current price quantity into constant price quantity across output, across input. So, we make all these methodological improvements. As a process, some quarter numbers will get bumped up, some may get bumped down.

This is part of the statistical revision. All that people should do is be consistent. Choose one base year and have numbers all the way and compare or do not cherry pick your numbers to suit the conclusion that you already have in your head.

SG: Now, let me ask you a follow-up. You are saying apples with apples, oranges with oranges. If you are taking the Rs 86 lakh crore figure for Q1 last year, then if you followed the same base, then are you suggesting this Rs 88 lakh crore figure for this year might have been much higher? 

VAN: Undoubtedly. But unfortunately, I can’t give you the number because MoSPI is not putting out that number because now we have shifted to a new base year. If you had stuck to the 2011-12 base year, then that number would be somewhere closer to 93, 94 or 95.

In fact, if anything, it would be even higher because in the old series, we were using only one price index to deflate and the wholesale price index had gone up so much because of input prices like crude oil, fertilisers, etc.

Prices went up in the April-June quarter because of the West Asia conflict. The nominal GDP number might have been much higher, in fact. Instead of 88, you may be looking at a number that is closer to 96 or whatever.

So that number we don’t have. So if at all you want to make an argument, I’m not saying you as in Shekhar, I mean the outside world, those who want to criticise, I think that they need to have the same basis, same methodology, reference period to be able to make those kinds of statements.

SG: So last year’s revision, in fact, or change in base year has reduced the size of India’s GDP, and that was under the NDA government. So, it’s not as if the NDA government is trying to dress up its figures for now or dress down the previous government’s figures. This is for their own year.

VAN: Absolutely, absolutely. In fact, the GDP, as I told you, our GDP value, nominal GDP was Rs 357 lakh crore as of March 2026 under the old series. In the new series, it is now 346. I can be very precise based on what MoSPI has given us. Now it is in fact Rs 345.37 lakh crore.

SG: And what that means is that also given the depreciation of the rupee, Indian GDP fell below the $4 trillion-mark.

VAN: You are right. As of March 2026, nominal GDP in dollar terms was $3.91 trillion in March 2026. 

SG: I would say in this case, if the government was trying to dress up the data and if any government had the power to do it without raising eyebrows with IMF and elsewhere because you are under watch all over the world, you could have kept it above 4 trillion dollars. That would have looked much better than 3.91. I understand this now. Does this also mean that all the following quarters would be reduced accordingly as Q1 was reduced last year?

VAN: No, that would be a very difficult thing to say, Shekhar, because it depends on the kind of price movements that happened in the particular quarter. So whether the numbers for the second, third, and fourth quarters of 2025-2026 will get revised up or down is something that I cannot say.

It depends on the methodology and the new price indices because MoSPI has been revising many of its input data series that go into GDP calculation. We now have a producer price index, which is one of the reasons why some numbers were slightly tweaked in this August edition. We have a new index of industrial production.

We now do regular household consumption surveys. So given all these things that are going on, all these changes, it is very difficult for me to tell you that the numbers for 2025-2026 quarters 2, 3, and 4 will get revised in a particular direction. That I can’t say.

SG: This producer price index system, as I understand, is now to conform to the UN system of national accounts. Is that so?

VAN: You’re right.

SG: Would you call that a positive change, a reform, or would you say that this is done under some kind of a global norm which might be onerous for India?

VAN: No, no, it’s not onerous.

In fact, the wholesale price index is at the level of the distribution channel before it reaches the end consumer. Producer prices are what is necessary to understand what is the price at the factory gate. And for some commodities, you need to have that.

And for others, you need to have what consumers pay, which is a consumer price index. So I think these improvements are necessary to have a basis wherein cross-country comparisons can be made if all of us do it on the same methodology and principles. And countries do have different price indices to deflate numbers from nominal to real, which is basically from current to constant.

And we were using one price index to do all of that. Now we have multiple price indices to be able to apply as per the series, as per the sector we are looking at. So it is an improvement.

And this was one of the reasons that last year, the IMF assessment, overall they gave India’s statistical system a B rating, but for national income accounts, they gave a lower rating because of this absence of double deflation methods and lack of updating of industrial production series, etc. All of them have been fixed in the last 8 to 10 months.

 

SG: Now be a prof and explain to us the double deflation system.

VAN: Look, in general, when we want to understand what the real growth is in an economy, as opposed to simply prices going up, we want to compare quantity produced in a base year and quantity produced in the current year by excluding the price effect. So you have to isolate the price effect.

To isolate the price effect, you have to use the price index and say, okay, now if I keep that constant, what really happened to the actual production in the economy? Did it go up or not? So for example, just to digress a little, in Japan, because in the last 25-30 years, since 1990, when the economy was going through deflation, which means prices were coming down year after year, paradoxically, in constant price terms, the GDP growth rate looked healthier.

Now if you remove the price effect, in current prices, Japanese economic activity was weaker. So whether it is deflation or in a period of inflation, you want to isolate the price effect and just concentrate on actual production in the economy. And for that, we need to deflate the nominal series by using some price index.

Instead of using only one price index, especially for manufacturing, now what we have, which is one of the important requirements of international agencies, is to have one separately for inputs, one separately for output. And that is what we have now. And also for the input series, we now have different sectoral price indices.

So we are not applying like one tool to deflate current prices into constant across the entire national income accounting series, particularly with respect to manufacturing. We are now using one separately for input, one separately for output, which is what many mature statistical systems do. And we are now part of that.

SG: So can you give me an example for the double deflation system? I understand that if somebody is producing any goods, iron ore is going in or steel is going in or energy is going in. The prices of energy are going up, petroleum are going up. So that is one type of inflation.

Then what the company or the person produces, the price of that product goes up. That is the other inflation. So you are saying that you are now knocking both off from the overall value of the product and that is double deflation?

VAN: Yeah, you know, you’re right. So, for example, take manufacturing.

This year in the first quarter, April to June, when we had the Persian Gulf conflict. So what is manufacturing value added? Value added is basically the total value of the output. What we produce minus the value of the inputs that go into it.

So that is value addition. And in terms of inputs, you have crude oil, electricity, metal prices, base metals like copper, steel, aluminium, et cetera. So now obviously in the first quarter, those were going up very sharply and therefore the input prices were going higher and therefore in nominal terms, the input value would have been much higher but in real terms, after excluding the price effect, it becomes quite low.

And MoSPI in its FAQ release has clearly shown that number, it was 22%. In fact, the input caused inflation. But let’s say on the other hand, on the output side, what people, companies, which use these inputs and produce, if they’re unable to increase their prices because of competition, because of market demand conditions, or whatever may be the reason, or they choose not to, then what happens is the nominal output, when it is deflated using output price index, it does not come down that much because output prices have not gone up.

So the net result is the real value of the output is not that much lower whereas the real value of the input is much lower because input prices have gone up and therefore the manufacturing GVA in real terms is higher. Now these kinds of things over a long period will wash out, you cannot just pick out one number and say oh you basically in a quarter when crude oil prices went up you are showing manufacturing GVA in real terms having grown faster at 9.3% compared to nominal terms 7.7%, that is not true, this is how exactly the methodology works and in some other quarter it will have a different dynamic, so that is how it is. So this is a classic demonstration of how the double deflation method worked.

SG: I am looking at mining for example and I have seen the MoSPI statement also that has come out. On mining: the question is how minus 2.4 real GVA that is gross value added with inflation in mineral goods etc. And I see the two data points there, one says real GVA is minus 2.4, I will follow up with the question on the state of our mining but nominal GVA gross value added is 22.3%. So mining is the starkest difference… if you would explain that.

VAN: So exactly in the case of mining, it is not a double deflation method that is at work here, what they are very clearly, that is why I said manufacturing they apply the double deflation method. Here what they do is when they compile GDP for quarterly, in the annual series they have more data and they will calculate current prices quantities first, apply the deflator and get the current and the constant price values.

But when you do quarterly series because not all data are available at this time, what they do is when they compile the constant price value or the real value of mining output, they are taking the volume indicators available from the index of industrial production.

So it is not as if you start with the current price quantity deflated and get the real quantity of mining output. What they are doing is they are taking the index of industrial production volume indicator and that in the quarter April to June, you had a negative growth in April, a negative growth in May and a slightly positive growth in June. So as a result in real terms, you had basically a minus 2.4% in real gross value added in the mining and quarrying sector.

But obviously, when you look at the nominal values, because of crude oil prices that went up and which is 33% according to them, other mining and quarrying went up by 8.7%, metal ores 23.5%. So you can clearly see in some sense, this is the kind of inflation in the input that went up quite a bit, which is why nominal value, nominal GVA growth in mining and quarrying was up 22.3%, whereas in real terms, because of the extremely high prices, the real growth was minus 2.4%.

But in any case, please remember in mining and quarrying, the real GVA for the quarterly numbers is calculated using the index of industrial production. When the annual series is released, it will all come, nominal will be calculated first and real will be calculated by using deflators for the annual series.

SG: Following up on this, do you have concerns on mining? Because from what I see of data, quarter after quarter, looks like one sector which seems to be weighing on our growth rates, weighing down our growth rates is mining. Mining is not picking up as much as we might have expected because a lot of reform has taken place in that area. There is a new law. The private sector has come in and yet mining output is not going up.

VAN: Yeah, you could say that.

I think in April and May, you had a lot of uncertainties. But if you look at the index of core industries production, which is also from an output side, it has not been so badly affected. In fact, if anything, the index of core industries is growing.

If I’m not mistaken, I’m quoting from memory here, it is growing at an annual rate of more than 5%. So it is not hampering industrial production activity. So to that extent, that’s a consolation.

But yes, you are right. At some level, obviously, the raw materials have to be mined and generated to be able to feed into the industrial production.

SG: Otherwise, they have to be imported.

VAN: Exactly, But the good news is that industrial production, the index of core industries production, is showing a very healthy trend.

SG: So before I let you go, I know that this has been a debate, and at least this I’ve been able to understand a little bit by now.

Why is your GDP deflator only 2.5% or something, whereas your consumer price index is much higher and the wholesale price index is even higher? Deflator is the percentage by which you adjust nominal GDP to arrive at real GDP. Whereas the consumer price index is 3.9% and the wholesale price index is 9%. So Dr V. Anantha Nageswaran, what a fix… Doesn’t it sound convincing at first look?

VAN: No, GDP is the total of all economic activity in the country. When you look at CPI, it’s only a very narrow household consumption basket.

And if you look at the wholesale price index, it is just basically the price index of goods at the level before they reach the end consumer. So both of them are narrow. A GDP deflator is an absolute comprehensive price index of the entire economy, which includes a lot of things, crude oil, renewable energy, aluminium, copper, steel, exports, corporate investments, services sector.

SG: And I believe the services sector has very low inflation.

VAN: Exactly. Industrial goods also are part of it. Capital goods are part of it. So it is a comprehensive index. And you just simply need to look at not only now, but anytime in the past for India or for any other country, try to put a simple way.

You simply have to plot the GDP deflator inflation rate and consumer price index inflation rate for any country, including India. Barring some occasional correlation or co-movement moving together, they are not necessarily correlated because they are very small strata. They cover a very small portion of the economy.

A GDP deflator is much bigger. So it can be higher or lower than these series. If there is a persistent trend of a very high inflation in CPI and WPI and the GDP deflator doesn’t show that, then, of course, you may want to take a look at it and see what is missing here.

But for a given quarter or here and there, this kind of deviation is par for the course.

SG: So I have to let you go. You have more important things to do. Before that, will you say, hand on your heart that, as they say in quotes, to your best information and knowledge and beliefs, this is the true GDP growth number for this quarter? Of course, everything is up for revision as we go ahead. But those revisions tend to be minor.

VAN: OK, Shekhar, you told me to say it with my hand on my heart. I’ll start by doing that. Hand on my heart. I can tell you in the economic survey in January 2026, I actually wrote that we are revising higher the potential growth rate of the economy to 7% and it could even go higher if we do deregulation, if private sector capital investment picks up, etc.

So we wrote that well before this GDP data came out, that we are revising the ability of the economy to grow to a level of 7%, notwithstanding the global uncertainties, number one. The second reason why I put my hand on my heart, I can say these numbers represent true underlying economic activity in the country, if you look at the high frequency indicators, which nobody is fudging because there’s actual cash involved.

People paying GST, banks extending credit, export growth in dollar terms, and then the index of core industries production. So you look at bank credit growth to industry, to consumers, GST paid, export growth rate, you look at the eBay bill raised, all of them are signalling that there is economic activity. So it is not as if the GDP data came out in a disjointed manner from these high frequency indicators.

That is why I can tell you with hand on my heart that we are missing the fact that the lagged effect of the structural reforms, including public investments made since 2014, are beginning to show through. The banking system is in very good health. It is lending.

And in the private sector, you have seen newspaper reports, it is beginning to do its CapEx in India. And you are very active on X. You are seeing how many young start-ups are saying, we have discovered this, we are coming out with this new product, etc. So in fact, sometimes I feel that the statistics cannot capture this dynamism.

So with complete clear conscience and hand on my heart, I can say that these numbers represent the true underlying vigour of the Indian economic activity. Thank you.