Some narratives are grounded in evidence, while others derive their force from selective interpretation rather than the facts themselves. The narrative of the “missing” ₹6 trillion in nominal GDP in the first quarter of 2025-26 or ₹42 trillion in nominal GDP from the first quarter of 2022-23 to the second quarter 2025-26 is one such case.
Four questions, political as well as economic, have emerged following the government’s declaration of India’s GDP growth at 7.8% in the first quarter of 2026-27.
First, what explains large revisions in nominal GDP. Second, what is the breakdown of these downward revisions across sectors. Third, why the deflator used to adjust data for inflation is so low despite high wholesale and consumer price index numbers. Fourth, whether the 7.8% growth reported is consistent with the economy’s leading indicators and investment trends.
To begin with, revisions are part and parcel of national accounts and are not an Indian peculiarity. The World Bank notes that larger revisions may be required when a new reference year or methodology is introduced.
India has a history of GDP base-year resets, with the base reset this century successively to 2004-05, 2011-12 and most recently 2022-23. Our analysis shows 239 data revisions over 70 quarters since 2008-09, of which 134 were upward and 105 downward. Clearly, these have no fixed pattern and cannot be attributed to any particular political regime.
However, 14 recent quarters, covering the period from the first quarter of 2022-23 to the second quarter of 2025-26, witnessed a downward nominal GDP revision of ₹41.8 trillion, compared with only ₹10.1 trillion across the preceding 56 quarters.
Earlier revisions were smaller. It was a downward ₹2.8 trillion from the first quarter of 2008-09 to the fourth quarter of 2011-12, ₹20,000 crore from the first quarter of 2012-13 to the second quarter of 2014-15, and then an upward ₹7.5 trillion from the third quarter of 2014-15 to the fourth quarter of 2021-22. Importantly, the lower count of revisions in the latest period indicates greater stability of India’s GDP series.
The movement in real GDP is interesting too. During the first quarter of 2022-23 to the second quarter of 2025-26, real GDP was revised upward by ₹372 trillion (while nominal GDP declined by ₹41.8 trillion). For the first quarter of 2012-13 to the second quarter of 2014-15, real GDP was revised up by ₹90.1 trillion (while nominal GDP changed by only ₹20,000 crore).
A large decline in nominal GDP along with a large increase in real GDP in recent times indicates that overall prices declined faster than physical output increased, implying greater purchasing power and availability of the same goods and services at lower prices.
The sectoral composition of the latest revision is more revealing than the aggregate number. Of the ₹41.1 trillion downward revision in gross value added (GVA) under the new series, nearly 95% is concentrated in trade, hotels, transport and communication ( ₹39.8 trillion). In contrast, finance, insurance, real estate and business services had a positive revision of ₹13.6 trillion.
This contrasting movement reflects the new methodology, which provides a more granular mapping of economic activity, particularly in informal sectors, using the Annual Survey of Unincorporated Sector Enterprise and Periodic Labour Force Survey, instead of relying mainly on proxy indicators.
While richer corporate and administrative data improve the measurement of finance and other formal-sector services, trade and related services have a substantial presence of unincorporated businesses. If we exclude this particular sub-sector, the overall GVA change falls to only ₹1.4 trillion.
The movement from trade towards finance and formal-sector activities can also be viewed alongside the broader process of formalization and financialization through greater banking penetration, digital payments and the expansion of formal financial channels.
There has also been considerable debate on whether publicly available information is sufficient to reconstruct the deflators under the new GVA methodology.
Our exercise suggests that reasonable proxies can indeed be constructed using available price and volume indicators, following the broad approach of double deflation for agriculture and industry and single extrapolation for services. For the first quarter of 2026-27, our estimated GVA-deflator inflation is 3.7%, close to the 3% as given by India’s ministry of statistics and programme implementation.
Finally, there is sufficient strength in broad-based high-frequency indicators in the post-pandemic period to support the reported pace of growth, with annual GDP growth staying above 7% since 2022-23.
India’s oil consumption as a proportion of GDP halved from 1.4% in 2013-14 to 0.7% of GDP in 2025-26 and its ratio of crude oil imports to GDP declined from a peak of 8.6% in the second quarter of 2013-14 to 3.1% in the second quarter of 2025-26, which partly explains India’s economic resilience amid global chaos.
Investment data also corroborates that resilience. Incremental gross fixed capital formation (GFCF) reached ₹11.1 trillion in 2025-26, with actual GFCF at ₹120.6 trillion or 34.9% of GDP. Average incremental private-sector investment has been around ₹3.5 trillion annually since 2022-23, higher than ₹3.3 trillion during the six years ending 2018-19. Investment announcements by India Inc reached around ₹84.7 trillion in 2025-26, with renewables and data centres accounting for around 31%, indicating a changing composition of investment.
Let us end with a Bayesian analogy. People often hear not merely what is said, but what their prior beliefs permit them to hear. Like perfect Bayesians with dogmatic priors, they assign inconvenient possibilities a probability of zero. No amount of new evidence can then revive them.
Hard facts arrive, but instead of updating beliefs, facts are re-interpreted until the world again resembles what was already believed. These critics should note how leading indicators for July and August have continued to show the economy’s strength.
The GDP debate should not be reduced to the size of revisions alone. The more important questions are their direction, composition, methodology and consistency with independent indicators. Evidence should lead the narrative, and not the other way around.
These are the author’s personal views.
The author is a member of the 16th Finance Commission, member of the Economic Advisory Council to the Prime Minister, and group chief economic advisor, State Bank of India.