Centre defends GDP estimates, says revisions reflect updated data, methodology

The government on Wednesday defended its methodology for estimating national income and the robust June-quarter growth rate, saying revisions to 2025-26 GDP and divergence between price gauges reflect updated data and methods, rather than an attempt to mechanically inflate the figures.

The ministry of statistics and programme implementation (MoSPI) issued a detailed clarification in a question-and-answer format, refuting allegations of artificially pushing up the real growth rate for the three months through June to 7.8% and the nominal expansion rate to 10.3%.

The clarification also came on a day when Japanese Credit Rating Agency (JCR) raised India's sovereign rating to 'A-' from ‘BBB+’ and assigned it a ‘stable’ outlook, citing the country’s robust growth prospects and improved fiscal metrics.

The statistics ministry on 31 August released an updated series of annual and quarterly GDP estimates, with 2022-23 as the base year, and rolled out a new Producer Price Index, Banking Services Price Index and additional administrative data.

Clarification

In its clarification, the ministry said the nominal GDP for the first quarter of 2026-27 was initially estimated at ₹86.05 trillion under the old 2011-12 base-year series. Following the introduction of the new GDP series with 2022-23 as the base year in February 2026, the estimate was revised to ₹80.32 trillion, and subsequently to ₹80.44 trillion on 5 June based on the latest data.

Once the new series for the Index of Industrial Production and the Producer Price Index became available, the nominal GDP estimate was revised to ₹80 trillion.

“Thus, the movement from ₹86.05 trillion to ₹80.00 trillion is the result of successive revisions to the GDP series arising from the change in the base year, incorporation of improved data sources and methodologies, and updation of available indicators,” the ministry said.

“It is therefore incorrect to interpret the difference as a deliberate downward revision of last fiscal year’s GDP to mechanically increase the current year’s growth rate,” it added.

It underscored that the old nominal GDP estimate of ₹86.05 trillion for the June quarter of the last fiscal year cannot be directly compared with the Q1FY27 GDP of ₹88.27 trillion because they belong to different GDP series.

The MoSPI also clarified that the 2.5% implied GDP inflation rate in the first quarter cannot be compared directly with Consumer Price Index-linked inflation of 3.9% or Wholesale Price Index-linked inflation of over 9%, as the GDP deflator covers the entire economy and reflects more than 300 individual price deflators.

A procedural update

Soumya Kanti Gosh, group chief economic adviser at State Bank of India, said revisions are part and parcel of GDP numbers. “Deducing results from two altogether different series is unsolicited, fallacious and an 'on purpose' sign of intellectual sclerosis,” he added.

"Some estimates are now ascribing a 2.6% growth in nominal GDP for the latest quarter instead of 10.3%, by calculating yearly growth rate using ₹88.3 trillion," Ghosh said, rejecting such estimates.

N.K. Singh, chairman of the 15th Finance Commission, said that base years are regularly updated worldwide to reflect evolving realities and economic structures. "They do ‘not represent a downward revision made to make the current year’s growth appear higher'. Any such attribution reflects prejudice, bias and a lack of understanding."

On manufacturing, the ministry said the 1.5% negative implicit gross value added (GVA) deflator does not indicate falling product prices. It said the sector’s GVA is now compiled using a double-deflation approach, under which output and intermediate consumption are deflated separately. When input prices rise faster than output prices, nominal GVA can grow more slowly than real GVA, resulting in a negative implicit GVA deflator.

In Q1 FY27, manufacturing nominal GVA grew 7.7%, compared with 9.2% growth in real GVA, producing the negative 1.5% implicit deflator. The ministry said faster input-price increases were observed in segments including textiles and cotton ginning, basic metals, and rubber and plastic products.

In contrast, agriculture recorded a positive 3.9% implicit deflator as its output price index rose by about 5%.

The ministry also clarified that double deflation does not directly apply to private final consumption expenditure (PFCE). It is a production-side technique used to estimate constant-price GVA by separately deflating output and intermediate consumption. PFCE, being a measure of final demand, is estimated using detailed volume indicators and relevant price indices.

On mining, it said the gap between real and nominal GVA was primarily due to sharp increases in mineral prices. Real mining GVA contracted 2.4% in Q1, broadly consistent with the decline in mining IIP, while nominal GVA grew 22.3%, reflecting sharp price increases in crude petroleum, natural gas and metal ores.