The ongoing controversy over India’s GDP estimate for the first quarter (Q1) of 2026-27, from April to June, echoes what happened after its base year was reset in 2015 from 2004-05 to 2011-12. This time, the gauge’s base was updated to 2022-23 and its inflation-adjuster upgraded.
Back then, too, the debate took on a political hue; critics alleged that data was fudged to over-claim prosperity. The latest bout is about real growth of 7.8% in the economy’s Q1 size, as reported by the National Statistics Office (NSO), over last fiscal year’s Q1.
Two flashpoints dominate. One, revisions of earlier GDP estimates. And two, the gauge’s switch from the wholesale price index to newly crafted producer price trackers that allow double deflation—with input and output numbers deflated separately to adjust for price inflation—instead of single to convert nominal growth into real.
On 2 September, India’s ministry of statistics and programme implementation issued a clarification that has not convinced critics. Nor has the ministry’s promise to release all the sources and methods for this calculation of the value of all goods and services produced in a quarter quelled qualms about data quality.
What’s clear is that dual deflation improves the math, even if India’s input price trackers are raw and yet to prove robust. Ideally, as former chief statistician Pronab Sen recently said, the NSO should have run the producer and wholesale indices in parallel and published both for public clarity on gaps and how they arise.
What such statistics capture, after all, are imperfect snapshots of the economy. This fact ought to moderate the importance we attach to GDP as a measure of our economic well-being.
Yet, to paraphrase what Winston Churchill said about democracy as a form of governance, GDP is the worst way to track a country’s progress, barring all the rest that have been tried.
Globally, economists have long debated the limitations of GDP. Even so, it remains the single most influential gauge for economic policy. The size of an economy indicates a country’s prosperity and its pace of expansion holds the key to gains on that score, while GDP per head offers a rough yardstick for the well-being of people.
It helps explain why India is the world’s sixth largest economy (and third by purchasing power parity), for example, but still ranks among the lowest by typical living standards (as our low GDP per capita conveys).
However, it reveals nothing about inequality and glaring divergences in one family’s quality of life from another’s. This is reason enough to look at suggestions made by the report of a UN group of experts titled Beyond GDP, whose findings were presented to member nations in May. It proposes a “dashboard of 31 indicators structured around four components.”
This proposal was criticized for complexity that renders it impractical; a dashboard of metrics can’t beat a single objective statistic that allows easy comparison over time and across countries. It would also let countries and politicians cherry-pick how they are judged. All of which goes to show why GDP has endured.
Should AI shortly emerge as a significant driver of output, we might find GDP even less reflective of other aspects of progress that we care about—such as human dignity. As former chief statistician T.C.A. Anant wrote in a Mint column, the answer is to “build around GDP,” not dismiss it. But that doesn’t mean we should not strive to improve its methodology as well as apparatus for data capture.