Onmanorama Explains | Did Modi government deliberately doctor GDP figures to project illusory growth?

On August 31, the Ministry of Statistics and Programme Implementation (MoSPI) came up with what can be called the 'India miracle' story. It was a kind of story that could have made many Indians laugh at themselves for having felt troubled by American President Donald Trump's bullying tariffs and the war he imposed on the world.

They shouldn't have bothered at all. In this period of intense geopolitical anxiety, India's real GDP grew by 7.8 per cent in the first quarter (Q1) of 2026-27 (April to June). This was touted as the highest Q1 real GDP growth during the four-year period from 2023-24 to 2026-27. What's more, no other country in the world had grown at such pace in the first quarter of 2026-27.

"India's exemplary GDP growth rate of 7.8 per cent during Q1 of FY2026-27 is a Herculean feat," Prime Minister Narendra Modi tweeted. "Reforms undertaken by the NDA government, together with an agile management of the economy, are bearing results," Finance Minister Nirmala Sitharaman added for good measure.

Not everyone was convinced. Primarily, three concerns were raised. One, MoSPI did mischief with GDP numbers; in fact, it downgraded the estimate for 2025-26 it had put out earlier to make the 2026-27 Q1 results look exceptionally bright. A case of wilful disfigurement of one to make the other look superior.

Two, the 'GDP deflator' used in the new method adopted to convert the GDP in current prices (nominal GDP) to the inflation-free 'real GDP' seemed bogus. And three, if India is doing so spectacularly well, where are the jobs?

Were GDP figures falsified?
MoSPI did not do anything out of the ordinary. It just revised the base year of GDP calculations from 2011-12 to 2022-23. Revising the base year is a regular mandatory practice, not a sinister one.

Base-year revisions are done with essentially four objectives. One, reflect structural changes in the economy. Two, incorporate the latest data sources - e-Vahan (vehicle registrations), the Public Financial Management System (PFMS), the Annual Survey of Unincorporated Sector Enterprises (ASUSE), the Periodic Labour Force Survey (PLFS), and the GST network- which now provide granular economic insights. Three, improve estimation methodologies to be in line with international best practices recommended by the UN Statistical Commission. Four, greater coverage and accuracy.

The year 2022–23 was selected as the new base year because, according to MoSPI, it represented the "most recent normal period" following the COVID disruptions of 2019–2021

But before the latest base-year revision was done, the Q1 GDP of the last fiscal (2025-26) was put out using the 2011-12 base-year figures. This was ₹86.05 lakh crore.

When the new 2022-23 base year was applied to 2025-26 Q1, the GDP was downsized to ₹80.27 lakh crore. The Q1 GDP for this fiscal, under the new method, was ₹88.61 lakh crore. It was the comparison of the Q1 figures derived using the new calculation - ₹80.27 trillion versus ₹88.61 trillion - that threw up the 7.8 per cent growth rate.

This is where the sceptics enter. Former Finance Secretary Subhash Chandra Garg, who had worked under Modi till 2019, argued that if the GDP figure from the old series was considered (Rs 86.05 lakh crore), the growth rate of 2026-27 Q1 would have been only 2.6 per cent.

The fact is, both the calculations are based on different sets of variables and, therefore, cannot be compared. At most, perhaps to understand how the difference in approach has played out, MoSPI can bring out GDP figures based on both the old and new base-year calculations.

Are new GDP numbers windfall for Modi?
Though they indicate exceptional growth in private investment, domestic consumption and exports, the most remarkable message broadcast by these new numbers should be a huge disappointment for Modi.

They suggest that the GDP figures he had boasted about in previous years could have been exaggerations. The PM, for instance, had said that India had grown by 8.3 per cent during the demonetisation year of 2016-17.

Under the 2011-12 base-year series, the nominal GDP, or the GDP in current prices, was ₹357 lakh crore on March 2026. After the new base was adopted, it has come down to ₹345.37 lakh crore. This is a significant 7 per cent reduction in the nominal GDP figure.

After such base-year revisions, a one to two per cent contraction in GDP figures is considered typical. But a 7 per cent shrink is unprecedented.

And as a result of the downward revision, India is no longer the fourth largest economy in the world, as trumpeted by the Modi government in 2025. After the new figures were out, India has slipped to the sixth position, and is now behind both Japan and Britain.

The Centre will also have to go silent for the moment on the 'four trillion dollar economy' claim. The new calculations have slimmed India to a 3.91 trillion dollar economy.

How different are new GDP calculations?
When the nominal GDP, or GDP in current prices, is converted into real or constant GDP, the effect of price increases on goods and services has to be removed. For this, a 'GDP deflator' is used.

In the old method, the wholesale price index (WPI) was the tool used to generate the 'GDP deflator'. The WPI indicates the price before it reaches the end consumer, not a realistic estimate of the cost borne by the consumer.

So, the new system looked at prices from the production side. It introduced the Producer Price Index (PPI). This denoted the prices at the factory gate, the cost right after production/manufacture.

MoSPI also employed 'double deflation', a mechanism by which price increases of both inputs and the output are separately calculated and collapsed to arrive at the real GDP.

El Nino conditions and the war in West Asia had pushed up prices of inputs like crude oil, fertilisers and metals like aluminium and steel in the first quarter. So when deflated, input prices in real GDP calculations had fallen steeply. However, market forces prevented output prices from surging as freely as input costs. So when output costs were deflated, the fall was relatively less.

Such molecular-level distinctions and calculations based on price changes at the basic level were unheard of in the old method.

Was 'GDP deflator' kept conveniently low?
The consumer price index (CPI) inflation is 3.9 per cent. And the WPI is 9.78 per cent. Yet, the GDP deflator, or the mathematical gadget used to draw out the inflation effect from the nominal GDP, was a low 2.5 per cent.

It is such a small deflator that kept the real GDP at a chest-thumping 7.8 per cent (10.3% nominal GDP - 2.5%)

The official reasoning is that the GDP deflator reflects the average of all the price movements of goods and services that went into the calculation of GDP.

The problem is, the National Statistical Office (NSO) - the central agency for collecting, compiling, and publishing official economic and social statistics - does not have the complete data on the inputs that go into the making of products.

If the double deflation mechanism was not adopted till now, it was only because the NSO was starved of relevant data. Even now, the NSO has not officially claimed that it has sufficient data.

So in the absence of authentic data, statisticians depend on proxies. For instance, when there is no information on the economic activity in the informal or unorganised sector, data from registered, tax-paying companies are used as proxies. This can be wildly off the mark. At this stage, there is no clarity on the dataset that has produced the GDP deflator of 2.5 per cent.

In this respect, the latest GDP figures are suspect.

Why the jobless growth?
The quarterly estimates show that the bulk of the 7.8 per cent GDP growth is accounted for by the tertiary (service) and secondary (manufacturing) sectors. Agriculture, which employs nearly half the total workforce in the country, has grown by only 3 per cent.

Stupendous growth in manufacturing or services do not provide the necessary boost in employment. Official estimates say that manufacturing absorbs only about 11 per cent of workers. And the high-value modern sector, including information technology, finance, and business services, employs only a minuscule 3 per cent of the workforce.