India’s economy is now officially smaller than previously thought. New GDP estimates released on Friday based on an updated methodology and base year have reduced the country’s nominal output by over ₹11 trillion ($133 billion), validating earlier concerns about the size of the economy
The downward revision may complicate the government’s fiscal arithmetic for FY26 and FY27, and may also delay India’s chances of becoming a $4-trillion economy, and the fourth largest economy leaving Japan behind.
Over the past decade, questions were raised by researchers, economists and policymakers, including former chief economic advisor Arvind Subramanian, over the methodology used in the 2011-12 series and the size of India’s GDP.
GDP data released on Friday by the statistics ministry based on the updated 2022-23 base year, showed India’s nominal GDP in 2025-26 at ₹345.47 trillion ($3.93 trillion), 3.26% smaller than the ₹357.14 trillion figure given in January based on the 2011-12 series.
This downward trend (2.9-3.8%) is visible across all four years for which data based on the 2022-23 series has been released.
“This has happened because 2011-12 data was likely overestimating figures as organized sector data was largely used to extrapolate figures for other sectors,” an official involved in the GDP calculation process explained, requesting anonymity.
The revised GDP takes into account several steps to capture the economy better such as the integration of goods and services tax (GST), expanding the use of double deflation and using improved deflation techniques in case of single deflation, and using survey results to capture the informal economy instead of relying on proxies.
P.C. Mohanan, former acting chairman of the National Statistical Commission (NSC), said the downward revision was surprising and had not happened before.
“In recent years, if we go by the new methodology, GDP (was) being overestimated in the earlier series,” Mohanan said. “That can happen only because you know many of the earlier methods used a lot of indicators and assumptions.”
However, Bank of Baroda chief economist Madan Sabnavis said that overestimation was a strong word to use in the context of 2011-12 data. “It is not so significant that everything has gone wrong because of it, but yes, the bias is in that direction,” he said.
The revision aims to address several issues raised by the International Monetary Fund (IMF), which had given the 2011-12 series a ‘C’ rating.
The GDP revision has come after a lag of 10 years, as opposed to internationally-recommended four to five years, since the junking of 2017-18 Household Consumer Expenditure Survey (HCES) in 2019 delayed the entire process.
It picked up pace when HCES was conducted again in 2022-23 and 2023-24. Earlier this month, the Consumer Price Index (CPI) was also upgraded to 2024 base year from 2012 base year, in line with HCES findings.
The impact on Budget maths
The most immediate impact of downward revision in nominal GDP is expected on the Union budget’s calculations. The budget figures were based on the first advance estimate of the nominal GDP for FY26 based on the 2011-12 base year, which was ₹357.14 trillion. With GDP revised down to ₹345.47 trillion, the government will have reduced fiscal space.
Back-of-the-envelope calculations by Mint suggest that the fiscal deficit for FY26 will rise to 4.51% of GDP from 4.36% earlier unless the government manages to save an extra ₹51,000 crore as compared to the current estimates.
Similarly, central debt will now need to be lower by ₹6.55 trillion if it has to stick to the budget goal of 56.1% of GDP.
This also puts the FY27 budget figures under pressure. Even if nominal GDP grows 10% as projected in the budget, it will reach ₹380.15 trillion and not ₹393 trillion estimated in the budget. This automatically means the fiscal deficit for FY27 may get stretched to 4.46% of GDP from 4.31% of GDP, while debt expands to 57.51% from 55.63% earlier.
“This would have some bearing on the debt consolidation roadmap, with the debt-to-GDP pegged 1.9 percentage points higher at 57.5% for FY27, making the consolidation path to FY31 relatively steeper than previously estimated,” said Aditi Nayar, chief economist, Icra Ltd.
Delayed milestone?
The downward revision in GDP could also translate into delayed achievement of international milestones.
As per the October edition of IMF data, India was expected to end FY26 crossing the $4-trillion-mark at $4.13 trillion. Now, at the average exchange rate of 87.944 per dollar, India can only reach around $3.93 trillion.
This also increased the GDP gap with the current fourth largest economy, Japan, whose economy is estimated to have been $4.28 trillion in 2025. The next update of the IMF, which will likely incorporate India’s revised data, is expected in April and will give clarity on India’s trajectory.
Manjul Paul contributed to this story.