Government Explains 7.8% GDP Growth After Subhash Chandra Garg Raises Questions

India's 7.8% GDP growth in the April-June quarter of 2026-27 has come under scrutiny after former finance secretary Subhash Chandra Garg raised questions about revisions in the country's new GDP series and argued that the headline growth figure may be overstated.

The government has now issued a detailed FAQ explaining the methodology behind the new GDP series, including the adoption of the 2022-23 base year, updated price indices, double deflation and the treatment of revisions in quarterly economic estimates.

India recorded 7.8% GDP growth in the first quarter of 2026-27, exceeding the Reserve Bank of India's forecast of 7%. The growth rate, however, was lower than the 8.6% recorded in the previous quarter.

One of the major questions raised during the debate was whether the previous year's GDP estimate had been revised downward to make the latest growth figure appear stronger.

The government rejected this claim, saying the revision in the Q1 2025-26 estimate resulted from successive methodological and data updates to the GDP series. According to the government, the revision was not made to artificially increase the current year's growth rate.

The new GDP estimates, released on August 31, 2026, use 2022-23 as the revised base year. The updated series also incorporates new measures such as the Output Producer Price Index and the Banking Services Price Index, along with updated administrative data.

A base year is used as a reference point for measuring economic growth and price changes. Governments periodically update the base year to ensure that economic calculations better reflect changes in the structure of the economy and current price patterns.

The government also addressed questions surrounding deflation in GDP calculations. Deflation refers to the process of removing the impact of price changes from nominal economic values to calculate real growth.

One of the key methodological changes discussed in the FAQ is double deflation, particularly in the manufacturing sector. Under this method, the value of output and intermediate inputs are adjusted separately for price changes before calculating real Gross Value Added.

This can produce different results from a simple comparison of output prices.

For example, manufacturing recorded nominal GVA growth of 7.7% in the first quarter of 2026-27, while real GVA growth stood at 9.2%. This resulted in an implicit GVA deflator of negative 1.5%.

The government clarified that negative inflation in the manufacturing GVA deflator does not mean manufacturing prices actually declined. Instead, it reflected a situation where input prices increased faster than the prices of finished products.

Agriculture, meanwhile, recorded an implied inflation rate of 3.9%. The government explained that agricultural current-price estimates are heavily influenced by output prices, with the Producer Price Index for Agriculture, Forestry and Fishing rising by around 5% during the quarter.

The FAQ also clarified that double deflation does not apply to Private Final Consumption Expenditure, or household consumption. Double deflation is used for calculating production-side industry GVA, while household consumption is measured through detailed spending and volume indicators.

Questions were also raised over why GDP inflation was estimated at 2.5% when consumer inflation stood at 3.9% and wholesale inflation was above 9%.

The government said there is no direct contradiction because the Consumer Price Index, Wholesale Price Index and GDP deflator measure different parts of the economy.

CPI tracks price changes in a basket of goods and services consumed by households, while WPI focuses largely on wholesale prices and commodities. The GDP deflator, however, covers the broader economy, including consumption, government spending, investment, exports and services such as banking, IT and real estate.

The government said the GDP deflator is derived using more than 300 individual price deflators, meaning it does not necessarily move in line with CPI or WPI.

The Q1 2026-27 GDP estimates are also subject to future revisions as more comprehensive data becomes available. The government said any revisions will depend on changes in the underlying production and expenditure data rather than on any mechanical adjustment to improve or reduce the headline growth figure.

The FAQ comes amid growing debate over India's new GDP methodology and the reliability of the 7.8% growth figure, with the government maintaining that the updated series reflects improved data, revised price indices and changes in the structure of the Indian economy.