The state of India’s economy is not as bright as GDP data may suggest

However, numbers for earlier years were significantly revised upwards, with GDP growth in 2023-24 estimated at 9.2%, as against 8.2% reported in January. Similarly, GDP growth in 2022-23 was upped from 7% to 7.6%.

These upward revisions offer hope for a better economic performance than the gloomy picture presented by the January figures. While GDP estimates do get revised based on fresh data, the extent of it this time is unusually large. In any case, stronger growth suggests a sharper economic recovery than what other data sources indicate. 

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However, a closer look at the disaggregated official data and evidence from other sources suggests that any euphoria on this count may be misplaced. First, annual GDP growth rates are not the best way to judge the structural and fundamental strengths of our economy. High growth in 2022-23 and 2023-24 came on a low base in previous years, when output suffered from a slowdown and then the pandemic. 

GDP growth rate in the five years ending 2024-25 has been a modest annual average of 5.3%, the lowest in the previous three decades for any five-year period. It was significantly lower than the 7% achieved during the first term of the current government, despite the slowdown after 2016-17. 

In some ways, it’s fair to say the economy is yet to recover from the twin shocks of demonetization and GST rollout, with the pandemic only worsening things.

On a long-term comparison, most other indicators mirror our GDP growth trend. Growth in private consumption as well as investment remain at least 2 percentage points per annum lower than their pre-2019 rates. Both these issues have been flagged by senior government officials. 

The latest growth estimates confirm a crisis of slowing demand and investment in the economy. The upward revisions reiterate these concerns. Taking the revised estimates into account, this fiscal year’s slowdown marks the largest decline in growth over the past two decades except for the pandemic years and the global financial crisis of 2008.

But a far more serious issue is the discrepancy between India’s broad state-of-the-economy indicators and other data sources. Unlike the national accounts, multiple data sources, both private as well as official, suggest a sustained trend of worsening income growth and job prospects. 

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Employment estimates from Periodic Labour Force Surveys continue to indicate a reversal of the economy’s structural transformation, as the country’s count of workers in the agricultural sector has been going up. Even the earnings data remains weak, with a downtrend in the growth rate of casual workers’ wages. This is consistent with evidence from other sources on what Indians at large earn.

Meanwhile, private-sector data broken up by industry groups also points to a drying up of pent-up demand. This is evident in what consumer goods and automobile companies have reported. The consumer confidence survey of the Reserve Bank of India (RBI) also shows weak intentions of discretionary spending by urban consumers. Other RBI data also points to an increase in financial vulnerability, with rising retail and gold loans and a decline in household savings. 

Clearly, large chunks of data from official surveys and administrative sources are less optimistic on the state of our economy than readings drawn from the National Accounts.

The issue is not the credibility of National Accounts data, which has its own limitations, including a 14-year-old base year and other methodological drawbacks. 

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Our broad worry should be that the Indian economy remains fragile. While structural factors such as a demand deficiency and weak investment growth do need policy attention, given the uncertainty surrounding the global economy, particularly with the onset of a tariff war, the challenge of reviving our economy requires a different approach. Policymakers must go beyond headline numbers from the National Accounts. 

The government needs to squarely address the issues of inadequate job creation and weak incomes (among most workers), while improving public services and pushing up investment in the economy. It must also address our long-standing crisis of agrarian and rural distress.

The author is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.