Over the last few days, India’s gross domestic product (GDP) figures have come under fresh scrutiny for two reasons: downward revisions to past nominal values and a lack of transparency regarding the use of the deflator (the difference between real and nominal GDP due to inflation). While most experts believe that the shift to the new base year 2022-23 in February has addressed several issues that existed in the previous 2011-12 series, a lack of full information on several fronts, especially the rapid inclusion of the Producer Price Index (PPI) in the GDP calculations, is a good enough reason to be skeptical about the numbers.
A smaller economy
After more than a decade of facing questions over GDP figures, India introduced a new methodology to calculate GDP, some of which included the use of current data from surveys for estimation of the unorganized sector, a shift towards the double deflation method for the manufacturing sector, and the use of supply-use data to reduce discrepancies between GDP estimated from the production and expenditure approach. All of these aim to address data quality issues raised by the International Monetary Fund (IMF), which gave a rating of ‘C ’, reflecting “some shortcomings that somewhat hamper surveillance”.
As a result of these upgrades, the size of the Indian economy declined in recent years. This was against the usual trend, when base year revisions and methodological improvements led to an increase in the size of the economy. According to a 2022 IMF working paper, 78 economies updated their national accounts in recent years, resulting in a median increase in GDP of 3.5%, asData For India highlighted.
The downward revision in annual numbers between 2022-23 and 2024-25 was done when India shifted to the new base year in February. The smaller quarterly estimates in the new series for these years, released last week, drew the public’s attention. A comparison of the first GDP print (released about two months after a quarter ends) and the latest revised numbers (released on 31 August) shows that nominal GDP figures have been revised downward across quarters, though the first two quarters (Q1 and Q2) have seen much sharper revisions.
The downward revision of ₹6 trillion in Q1 FY26, or around ₹11 trillion in full-year FY25, is the result of significant corrections to overestimations that occurred under the old series.
According to an analysis by Data For India, the non-financial private corporate sector accounted for most of the decline in the new GDP estimates. The estimates for the private corporate sector have been a subject of controversy as they were based on a small sample of companies. In the 2011-12 series, the statistics ministry incorporated the MCA-21 database into GDP calculation, though it faced questions of overestimation of the sector’s contribution to the economy. In earlier series, an economy-wide Paid-Up Capital (PUC) based multiplier (or blow-up factor) was used to scale up the estimates of reporting companies to account for the contribution of 'active companies' that had not filed their returns (but for which PUC data was available). The new series now applies disaggregated PUC-based multipliers to different types of firms.
While the new series seems to have made a course correction—the statistics ministry did release detailed discussion papers on a new methodology that improves transparency—the acknowledgement from the government has been thin compared to its celebration of strong growth numbers.
The downward revision in past nominal numbers has consequences, as many indicators, such as fiscal deficit and debt, are tracked as a percentage of these figures. The statistics ministry, which is expected to release a back series of GDP data based on the new series, will provide a fuller picture of how the economy’s size has changed compared with previous estimates over the years. The downward revisions, though, have led to calls for an acknowledgement from the government of past estimates and the release of more granular data for independent scrutiny of the numbers.
Deflator debate
In the recent quarter (Q1 FY27), when the GDP deflator stood at 2.3% while retail inflation averaged 3.9% and wholesale inflation 9.4%, its low value raised eyebrows. The statistics ministry explained this was the result of a shift towards the double deflation method, which adjusted input and output prices separately. This was most prominent in the manufacturing sector, where double deflation and the use of PPI instead of WPI has been used (though input PPI would be a better measure but it is currently at a trial stage). At a time when PPI also stood at around 9%, the manufacturing deflator was -1.4%. This dichotomy can happen when input prices rise faster than output prices, resulting in a negative deflator. This means that even as prices rose for both producers and consumers, profit margins were squeezed, reflecting less value added at current prices.
According to Abhishek Upadhyay, co-head of Research at ICICI Securities Primary Dealership, double deflation is a better method of price adjustments and has corrected distortions that were happening due to the high usage of wholesale prices, particularly for periods when commodity prices are very volatile. “As companies pass on the input costs to consumers, the deflator is expected to rise in the coming quarters,” Upadhyay said.
While the shift to double deflation and the incorporation of PPI, despite Q1’s low figure, align with IMF’s recommendations, fresh questions have been raised over the lack of transparency in computing PPI itself, which the commerce ministry is compiling. Former chief statistician of India, Pronab Sen, raised questions over the sudden availability of PPI and its rapid inclusion in GDP calculations. According to Sen, India had been trying to compile PPI but had not succeeded for close to three decades, as companies were reluctant to share their prices, citing this as part of their competitive strategy. “PPI is the right measure, but we heard nothing until it suddenly came out; more transparency would have given credibility to the estimates,” Sen said.
Sen is correct, as the discussion papers released in late 2025, before the base year revision, made no mention of PPI. In fact, it only stated that revised indices of wholesale and retail prices and industrial output will be incorporated at a later stage. About eight months later, PPI was incorporated into the GDP calculation, even though it had only been launched in June, with data available only from April 2023. To be sure, the government constituted a working group under Niti Aayog member Ramesh Chand in January 2025 to review the compilation of PPI, and a detailed methodology is available in the public domain. However, the rapid inclusion of the index in GDP calculation has raised concerns over a lack of scrutiny of data quality.
Rupanjal Chauhan contributed to this story.