Govt defends GDP estimates, says revisions reflect data .

India’s economy grew 7.8 per cent in real terms in the first quarter of fiscal 2026-27, according to the revised GDP series.

The statistics ministry on Wednesday defended the methodology behind its newly released economic growth estimates, saying revisions to last year’s GDP and the divergence between different price measures reflect updated data and estimation techniques rather than an attempt to artificially boost headline growth.

The clarification came two days after the government released an updated series of annual and quarterly GDP estimates with 2022-23 as the base year, incorporating a new Producer Price Index (PPI), Banking Services Price Index and additional administrative data.

The ministry’s detailed questions-and-answers addressed concerns ranging from negative implicit price deflators in manufacturing to the sharp difference between nominal and real growth in mining, as well as the sizeable statistical discrepancy between production- and expenditure-side estimates.

India’s economy grew 7.8 per cent in real terms in the first quarter of fiscal 2026-27, according to the revised GDP series.

The ministry said a negative implicit GVA deflator for manufacturing should not be interpreted as evidence that factory-gate prices declined.

Manufacturing GVA in the June quarter was compiled using a double-deflation method, under which output and intermediate consumption are separately adjusted for price changes before real GVA is derived. When input prices rise faster than output prices, nominal GVA can grow more slowly than real GVA, producing a negative implicit deflator even when both output and input prices are increasing.

Manufacturing real GVA grew 9.2 per cent in the quarter compared to nominal growth of 7.7 per cent, resulting in an implicit GVA deflator of minus 1.5 per cent, the ministry said.

It cited textiles and cotton ginning, basic metals, and rubber and plastic products among activities where input-price growth exceeded output-price growth.

The ministry also pointed to international experience, saying negative or volatile manufacturing deflators can emerge in economies using double deflation during periods of energy and raw-material price shocks.

Agriculture presents a different case because quarterly agricultural GVA is first estimated at constant prices using production data, with current-price estimates subsequently derived using the relevant producer-price index. The agriculture, forestry and fishing output PPI rose about 5 per cent in the quarter, resulting in a positive implied inflation rate of 3.9 per cent, the ministry said.

It also rejected claims that the Q1 2025-26 current-price GDP estimate was reduced from Rs 86.05 lakh crore to Rs 80 lakh crore to make the latest growth rate appear stronger.

The Rs 86.05 lakh crore figure was calculated under the superseded 2011-12 base-year series and was initially published in August 2025. When the government introduced the 2022-23 base-year series in February 2026, the corresponding Q1 estimate was revised to Rs 80.32 lakh crore.

That figure was subsequently updated to Rs 80.44 lakh crore when provisional FY2025-26 GDP estimates were released in June, before being revised to Rs 80 lakh crore following the incorporation of the new IIP and PPI series.

The ministry said these revisions reflect the normal process of incorporating a new base year, improved data sources, updated methodologies and additional indicators.

It also stressed that the old Rs 86.05 lakh crore estimate should not be directly compared to the latest Q1 2026-27 estimate because the two figures belong to different GDP series. The comparable Q1 2025-26 benchmark under the latest series was Rs 80.32 lakh crore.

The government also sought to explain why the implied GDP inflation rate of about 2.5 per cent can differ substantially from consumer and wholesale inflation.

The GDP deflator is an economy-wide measure derived from the ratio of nominal to real GDP. Unlike the Consumer Price Index, which tracks a defined basket of household consumption, or the Wholesale Price Index, which focuses largely on goods and excludes services, the GDP deflator captures the price effects across the economy, including investment, government spending, exports and a broad range of services.

The ministry said more than 300 individual price deflators are used at the item or group level in the GDP compilation. The resulting implicit GDP deflator therefore does not have to move in line with either CPI or WPI.

Differences in coverage, weights, price concepts and sectoral price movements can produce significant differences between the three measures.

The ministry said the wide gap between nominal and real GVA growth in mining was primarily explained by sharp increases in mineral prices rather than an inconsistency in the estimates.

Real mining and quarrying GVA contracted 2.4 per cent in Q1 FY27, broadly consistent with the weakness recorded in the Index of Industrial Production for the sector. Mining IIP declined 3.8 per cent in April and 1.4 per cent in May before increasing 1.6 per cent in June.

At the same time, producer prices rose sharply. Mining and quarrying PPI inflation stood at 22 per cent in April, 21.2 per cent in May and 15.5 per cent in June. Prices of crude petroleum and natural gas rose as much as 72.2 per cent in May, while metal-ore prices increased more than 23 per cent in each of the three months.

As a result, nominal mining and quarrying GVA grew 22.3 per cent in the quarter despite the contraction in real GVA.

The ministry also cautioned against reading too much into the relatively large statistical discrepancy between GDP estimates derived through production and expenditure approaches.

The discrepancy is a balancing item reflecting the difference between the two approaches and can change as more comprehensive source data become available. The ministry said its current size should not by itself be interpreted as evidence that GDP has been understated or overstated.

Future revisions could therefore move GDP in either direction, depending on changes to the underlying production- and expenditure-side estimates.

The ministry said discrepancies become very small or zero in final current-price estimates, citing FY2022-23 and FY2023-24 as examples.

The clarifications came as India transitions to a new GDP series designed to incorporate more recent data sources, revised methodologies and updated price indices. The use of double deflation in manufacturing is among the methodological changes attracting particular attention because it can produce a negative implicit GVA deflator even when both output and input prices are rising.

The latest explanations are aimed at addressing questions about how the new series captures price movements, sectoral activity and revisions to historical estimates.

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