GDP Debate Needs Methodological Clarity, Not Premature Conclusions: Lekha Chakraborty

Noted Delhi-based economist Dr Lekha S Chakraborty, who is Professor and Chair at the National Institute of Public Finance and Policy (NIPFP), dwells on the GDP numbers debate and argues that advanced debate on levels, growth rates and historical comparisons should wait for the official GDP back-series. “Until that transparent bridge between the old and new series is published, it is effectively a macroeconomist’s holiday,” avers Chakraborty, who is also a Governing Board Member of the International Institute of Public Finance and Policy, Munich. Edited excerpts:

We are currently witnessing a debate over the latest GDP numbers, particularly after former Finance Secretary Subhash Garg questioned the revisions to the previous year’s estimates and argued that the latest growth rate may be overstated. How do you assess Garg’s argument from a purely statistical and economic perspective — and how much of the controversy is really about the way the base has been revised rather than about the actual pace of economic activity?

Subhash Garg records that nominal GDP for Q1 FY 2025-26 was revised from roughly ₹86 lakh crore under the old 2011-12 series to about ₹80 lakh crore under the new 2022-23 series. Placing the old level against the new Q1 FY 2026-27 figure of ~₹88 lakh crore produces an apparent 2.6 per cent nominal growth. That arithmetic is statistically invalid.

National accounts are constructed frameworks, not continuous raw data. They rest on a base year, data sources and methodology. When these change, historical levels are re-estimated for internal consistency. MoSPI (Ministry of Statistics and Programme Implementation) Secretary Saurabh Garg has labelled the comparison “apples-to-oranges.” The ₹80 lakh crore figure was already published in February 2026, months before the latest numbers. Within the consistent new series, growth is 10.3 per cent nominal and 7.8 per cent real.

Pronab Sen, former Chief Statistician, affirms the convention to compare the latest revised estimates under the same series. He attributes most of the large level drop to correction of earlier informal-sector over-estimation, while describing the optics as “really bad.”

(Former Chief Economic Adviser to the Government of India) Arvind Subramanian calls Garg’s 2.6 per cent figure “technically flawed and overstated,” yet adds that the government is only “half right” in the sense that economic activity is improving, but magnitude and the accumulated trust deficit still require fuller answers.

From this vantage point, the current GDP controversy is about the base-year overhaul itself, not “fabricated” current activity.

India has moved from the old 2011-12 base-year GDP series to the new 2022-23 series. What has actually changed and to what extent can we legitimately compare growth rates across series?

It is useful to recall here the fundamental GDP equation that underpins the entire framework: GDP equals Gross Value Added (GVA) plus “fisc,” where fisc is defined as net indirect taxes (indirect taxes minus subsidies). Methodological debate must therefore examine both the estimation of GVA across sectors and the treatment of the fisc components.

The new GDP series rests on four structural upgrades. First, broader data with GST, e-Vahan, PFMS, ASUSE and PLFS now feed GDP estimation directly. Second, multi-activity firms are allocated by actual activity shares rather than dominant industry. Third, Supply-Use Tables reconcile production and expenditure sides more tightly. Fourth, double deflation with 500–600 granular price indices replaces earlier single-deflation practice, especially in manufacturing and agriculture.

Nominal GDP levels are ~3 per cent lower because prior informal-sector estimates were too optimistic. Growth rates across series are therefore not comparable. I agree with Pronab Sen in recommending parallel old- and new-base series for at least five years. Until a transparent back-series appears, any splicing of old-series rates onto new-series levels remains restricted.

What is the most convincing independent evidence that the new numbers capture stronger growth?

I am not in favour of analysing economic growth from “high frequency” indicators. However, high-frequency indicators independent of national accounts (listed-company real sales, non-food credit, GST collections, IIP, steel, cement, vehicle and tractor sales) offer a plausible external check. True, that! Still, gauging economic growth from high-frequency indicators is desperation rather than sophistication. Having said that, several high-frequency indicators have expanded robustly. Saurabh Garg cites them as consistent with 7.8 per cent. Arvind Subramanian acknowledges the momentum while demanding full sources-and-methods disclosure. Triangulation is the test: when independent volume and value series move in the same direction and magnitude, confidence rises. Persistent divergence would justify scepticism.

There is a disconnect between headline GDP and lived experience — jobs, wages, purchasing power, etc. How much weight should we give this? Is high growth possible while many do not feel it?

Substantial weight. GDP measures aggregate production, not redistributive justice. Dualistic growth allows formal, high-productivity sectors to expand while large informal and rural segments see limited real-wage or job-quality gains.

Raghuram Rajan has posed the exact puzzle with clarity. He neither questions nor endorses the 7.8 per cent figure, yet asks why strong GDP growth has not produced more private investment, more FDI and more decent jobs. Gross fixed capital formation (GFCF) in public and private corporate sectors needs to be analysed to understand any pre-emption of loanable funds to finance fiscal deficits that displaces private corporate investment. However, the high fiscal deficits are substantiated through high public capital spending to support economic growth. Yes, this is public investment-led growth if we take a meticulous look into GDP at disaggregated levels. Weak private capital expenditure is an observable signal of why benefits remain uneven. And limited quality employment, too.

The debate must now move beyond magnitude and methodology to structural versus cyclical components of GDP growth. Gita Gopinath has alerted that “cycle is the trend,” meaning what looks cyclical can become the trend. If any downward pressure in GDP is “structural” rather than “cyclical” — meaning if the downturn in GDP is a permanent scar rather than a temporary dip — then the conventional counter-cyclical fiscal and monetary tools lose effectiveness. In that setting, the Viksit Bharat pillars, especially its next-gen reforms pillar that raises total factor productivity, become decisive.

NIPFP has worked with MoSPI Secretary on these aspects of Viksit Bharat pillars, where I am privy to such discussions. Only sustained TFP (total factor productivity) gains can convert aggregate expansion into broad-based jobs, investment and living standards.

It is a tough ask, and MoSPI is on the job to create the right statistics and new data to capture these new dimensions of growth, including innovation and AI. High growth without shared gains is fragile. Policy must therefore focus on employment intensity, median real incomes and the investment climate that would close the gap many economists, including Rajan, identify.

My take is that any advanced debate on levels, growth rates and historical comparisons should wait for the official GDP back-series. Until that transparent bridge between the old and new series is published, it is effectively a macroeconomist’s holiday. No macroeconomic analysis more plausible than slicing the series is currently available. The immediate task is methodological clarity, independent triangulation and attention to the structural foundations of growth, not premature numerical contestation.