Why India’s latest GDP number may matter less than usual
India’s first advance GDP estimates have traditionally worked mostly as an early, temporary input into Budget planning. This year, their relevance is even shorter, with a major overhaul of GDP calculations due next month.
India has entered the final stretch of measuring its economy using a statistical framework that is more than a decade old. On 7 January, the statistics ministry released the first advance estimates of gross domestic product (GDP), projecting real growth of 7.4% for financial year 2025-26 (FY26) and nominal growth of 8%, a number that would typically anchor policy debates, budget arithmetic and market expectations. This time, however, its shelf life may be unusually short.
In February, the government will roll out a revised GDP series with 2022-23 as the new base year, replacing the existing 2011-12 framework. Once the new series is adopted, growth rates, nominal GDP levels and key fiscal ratios could be recalculated—effectively redrawing the map by which the economy is measured.
While releasing the first advance estimates, the statistics ministry flagged the impending revision and cautioned readers to interpret the numbers accordingly. “The advance and quarterly estimates will undergo revisions due to changes in the methodology of estimation at current and constant prices, incorporation of updated and new data sources, updation of annual benchmark, etc.," it said.
The first advance estimates, released ahead of the Union Budget presentation on 1 February, are typically based on data available only until September or November of a financial year. Full-year numbers are extrapolated from this partial information, making them heavily influenced by first-half performance. If growth in the first half is weak, the estimates tend to undershoot; if it is strong, they can overshoot.
These numbers lose relevance quickly. They are superseded by the second advance estimates released by the end of February, and further diluted once provisional estimates are published at the end of May, after the financial year closes. More often than not, there is a meaningful gap between the growth rates reported in the first advance estimates, second advance estimates and provisional figures—all released within a span of four months.
Economists and policy-watchers have long flagged these limitations, particularly because the first advance estimates inform budget planning. Many key fiscal metrics—expenditure, tax collections, the fiscal deficit and debt ratios—are calculated as a share of nominal GDP.
Early snapshot
A Mint analysis of GDP data over the past decade shows that the gap between the first advance estimates, second advance estimates and provisional figures are a recurring feature, though the direction has varied with economic conditions, though the direction has varied with economic conditions. Between 2017-18 and 2024-25, excluding the pandemic years, the maximum gap between the first advance estimates and provisional estimates was 90 basis points. In only three of those years was the gap 20 basis points or less.
When it comes to the final estimate, which is released in the form of second revised estimates nearly two years after a financial year has ended, also shows similar gaps. In the eight years between FY17 and FY25, real GDP growth was revised up more often than it was revised down. At least, two-thirds of the upward revision was done with 50 or more basis points.
For the current year, economists anticipate a familiar upward revision.
N.R. Bhanumurthy, director at the Madras School of Economics, said the 7.4% growth projected in the first advance estimates for 2025-26 is likely an underestimation. “These numbers are based only on partial data, and generally, a lot of spending happens in the last quarter," he said.
Bhanumurthy also expects the impact of income tax and goods and services tax (GST) cuts to show up more clearly in later estimates. “Effective tax rates have come down by 4-5 percentage points, which actually gives more disposable income," he said.
For 2024-25, the gap between the first advance estimate of 6.4% and the latest available figure of 6.5% remains narrow so far, though further revisions are expected in February.
Resetting the base
This year, the first advance estimates risk becoming even less relevant because the GDP framework itself is undergoing a long-overdue reset. The statistics ministry is preparing a revised series that will update the reference year for prices, sectoral weights and production structures, recalibrating both the level and composition of GDP. This will not be a routine revision but a comprehensive overhaul.
“The purpose of a new base year is not to produce higher or lower numbers, but more accurate ones," said Pronab Sen, former chief statistician of India. International practice, he noted, typically involves running the old and new series in parallel for a few years to help analysts understand how levels and trends change. “For two to three years, both series usually coexist," Sen said.
The last major base year revision took place in January 2015, when the base year shifted to 2011-12 from 2004-05, aligning national accounts with global standards by moving from GDP at factor cost to gross value added (GVA) at basic prices. When such revisions happen, a back series of data is also released to make the past data comparable with the current figures. The last revision in the GDP series led to changes in GDP growth by as much as two percentage points between FY07 and FY14.
The proposed shift to the 2022-23 base year is expected to better reflect structural changes in the economy. It will incorporate updated consumption classifications, greater use of administrative datasets such as GST filings and vehicle registrations, and improved coverage of the unincorporated sector. Reclassifying the Food Corp. of India (FCI) into the government sector will also ensure food subsidies are recorded more transparently.
The second advance estimates for 2025-26, along with revised historical and quarterly GDP data under the new base, are scheduled to be released on 27 February. They will formally mark the transition to a new statistical series—and reset the reference point against which India’s growth, fiscal ratios and economic trajectory will be interpreted in the years ahead.
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