India’s revised GDP series has delivered an unexpected outcome: a smaller economy and weaker private consumption. For a growing economy, a downward revision in size is unusual, unless earlier estimates overstated activity.
GDP data released last week by the statistics ministry, based on the updated 2022-23 base year, showed India’s nominal GDP for 2025-26 at ₹345.47 trillion ($3.93 trillion)—3.26% lower than the ₹357.14 trillion estimate published in January under the 2011-12 series.
The downward revision stems from those earlier overestimations. In an interaction with Mint, the statistics ministry confirmed that proxy indicators used in the older series had led to overestimations, validating concerns raised by economists, policymakers and researchers for nearly a decade.
But the shrinkage is only part of the story. The methodological overhaul also strengthens the integrity of the data, even as questions remain over discrepancies and deflators. Mint examines five key questions around the GDP restructuring.
The ghost of the GDP past
The revision of India’s GDP methodology, more than a decade in the making, was long overdue.
Over these eleven years, doubts persisted about the economy’s true size. The delay, beyond the ideal five-year revision cycle, even prompted the International Monetary Fund (IMF) to assign a ‘C’ rating to India’s GDP data, flagging shortcomings despite an overall ‘B’ rating. Under intense scrutiny from economists and international organizations, the latest update offers more reliable estimates.
A Mint analysis shows nominal GDP levels were revised lower by 2.9–3.8% for 2022-23 to 2025-26. The contrast with the 2015 revision is stark: GDP levels for 2011-12 to 2013-14 were then revised upwards by 5.3–8.3%.
Speaking to Mint, Saurabh Garg, secretary at the ministry of statistics and programme implementation (MoSPI) called changes in levels “inevitable” due to methodological improvements; He added that “estimates arrived at using the proxy indicators in old series were relatively higher than those compiled using survey data in new series for most of the industries”.
Consumption correction
India’s economy is consumption-driven. Household demand shapes the depth and breadth of economic activity, and private expenditure anchors growth momentum.
In the latest update, a large part of the correction has come in private final consumption expenditure (PFCE), a proxy for consumption in the country. In the new series, nominal PFCE levels have been revised down by 9.7–11.5% for FY23–FY26.
Experts have found this puzzling as the 2022-23 Household Consumption Expenditure Survey (HCES), which formed the basis for these estimates, showed higher spending levels as well as better data capturing.
“The methodology they have used is supposed to capture private household expenditure much better; they should have given a higher figure actually,” said P.C. Mohanan, former acting chairman of the National Statistical Commission (NSC).
Garg said the lower levels reflect a reduction in earlier discrepancies, adding that more granular information and rising household savings have contributed to the correction.
Sectoral shift
Similar adjustments have led to sharp downwards revision in several services-centric sectors, most notably ‘trade, hotels, transport, and others’, taking the share of services (tertiary sector) in the economy’s pie to 53.0% average for FY23-FY26 from 55.1% estimated earlier. However, services have held their dominance in the Indian economy.
The secondary sector, comprising industries, has also been revised lower in level terms, yet its share has edged up, supported by strong manufacturing growth over the past two years.
Under the new series, manufacturing growth was 8.3% and 11.4%, respectively, in FY25 and FY26 as against 6.3% and 9.2% under the old series. Agriculture (primary sector), has bucked the broader trend, with its share rising to 19.1% from 17.6% earlier.
According to Garg, the primary sector has gone up due to inclusion of new fruits and vegetables, updated rates and ratios for capturing production, and drop in the value of overall input.
Discrepancies delay
A major issue, that concerned economists and the IMF, was the high level of discrepancies—the gap between GDP estimates calculated from the production and the expenditure side. Discrepancies have been 2-3% of the nominal GDP level in the 2011-12 series, leading to significant overestimation as well as underestimation of the size of the economy over the years.
While the statistics ministry, before the release of the data, had said it was working to reduce discrepancies to zero or minimal levels, it was not the case in recent years, leading to questions from experts.
To be sure, discrepancies in nominal terms are zero for the initial two years (FY23 and FY24) and have gone down to just 0.3% of GDP in the recent two years (FY25 and FY26), but their levels were much higher, up to 1.5%, at 2022-23 prices.
Addressing the issue, Garg said discrepancies stem from limited availability of comprehensive annual data for FY25 and FY26 and are expected to be eliminated or minimized at the time of final GDP estimates.
That reassurance may offer limited comfort. Advance and provisional estimates are closely watched by policymakers and markets, while final estimates arrive two years after a financial year has ended.
Price pains
Another longstanding concern around India’s GDP estimates has been the use of deflators, the price indices that convert nominal GDP into real terms by stripping out inflation.
The central criticism was the practice of single deflation, which applies one price index across the board, instead of double deflation, which uses separate indices for input and output prices. Economists have repeatedly flagged the heavy reliance on the Wholesale Price Index (WPI) as a source of potential mismeasurement.
The new series introduces double deflation for manufacturing, addressing part of that concern. However, reliance on WPI continues due to the absence of a Producer Price Index (PPI), a more comprehensive measure that includes services, avoids double-counting taxes, and captures inflation at the source before it reaches consumers.
Garg said the ministry plans to incorporate PPI once it becomes available, noting that work on it is underway. In the meantime, WPI usage has been refined and is now applied at the item level to narrow gaps.
Data suggest some improvement. The positive gap between nominal and real GDP has widened under the new series during periods of low WPI inflation, indicating that the distortionary impact of WPI may have moderated, though only marginally.