Following the release of India’s FY26 GDP estimates on June 5, and most recently, post the release of the estimates for Q1FY27 on August 31, there have been extensive commentaries on the state of the Indian economy. Much of it has been optimistic about India’s economic momentum. A section of academic opinion, however, has continued to be sceptical about the reliability of the evidence underlying this optimism, pointing to issues in national accounts methodology. Here, we seek to examine and address the important concerns raised.
The 7.8 per cent real GDP growth recorded in Q1FY27 is underpinned by a broad constellation of high-frequency indicators, lending credence to the strength and breadth of the expansion. Commercial vehicle sales grew 18.3 per cent, signalling strengthening freight and business demand, as firms expand fleets in anticipation of higher demand. The investment cycle appears particularly robust: Capital-goods production grew 15.2 per cent and machinery and equipment imports 51.5 per cent. Cement production, finished steel consumption and infrastructure/construction goods also expanded strongly in Q1. E-way bill generation remained in double-digit growth, while gross GST collections rose 8.4 per cent despite substantial rate rationalisation. Together, these indicators point to resilient underlying activity.
Consumption, too, remained resilient, with household vehicle registrations and three wheelers pointing to firming discretionary demand in Q1FY27. Non-food bank credit grew 18.3 per cent year-on-year at end-June, up from 15.9 per cent in March, with broad-based growth across agriculture, industry and services. The confluence of strong investment, resilient consumption, buoyant goods movement and expanding bank credit suggests that the expansion is sustainable.
One persistent concern relates to the price adjustment between the GDP at current and constant prices, that is, GDP deflation, despite the substantial methodological improvements in the base-year revision. Following the first-quarter results, the most substantive technical concern raised about the estimates is also about GDP deflator. In line with international best practice, the revised National Accounts have shifted from WPI (Wholesale Price Index) to the new Output PPI (Producer Price Index) for price corrections. The February 2026 revision had already moved away from single deflation, adopting double deflation wherever feasible and volume-based extrapolation otherwise.
The relatively small revisions arising, particularly, from the shift from WPI to PPI have buttressed our earlier assessment that the use of WPI had not introduced any material anomaly, given the close conceptual alignment between the two. However, the simultaneous changes in deflation methods and price databases have made recent movements in the GDP deflator less readily interpretable, as reflected in commentaries following the Q1 release.
We have moved to double deflation in manufacturing, under which output and intermediate consumption are deflated separately, with real GVA (Gross Value Added) derived as the difference between their real values. This is the global best practice in National Accounting. When input prices rise faster than output prices, nominal GVA growth can be lower than in real GVA, producing a negative implicit GVA deflator even when both output and input prices are rising. There are instances of advanced economies using double deflation encountering similar outcomes. In Q1FY27, higher raw-material inflation relative to output inflation contributed to a lower GVA deflator, while low price growth in some services further widened its divergence from headline CPI/WPI. Constant price GVA estimates are not compiled based on headline price indices; it is the result of careful deployment of over 300 producer prices/price indices across a disaggregated array of inputs and outputs. It cannot be faulted by quoting aggregate, disparate numbers, misleading public understanding of a transparently refined set of statistics.
Let us now focus on manufacturing GVA which is mostly in public focus too. This warrants an explanation, also because, if manufacturing GVA deflator had been close to that of the non-manufacturing GVA, the overall deflator would have been closer to public perception. What is the counterfactual? Analytical commentaries have correlated manufacturing IIP (Index of Industrial Production) growth with real manufacturing GVA growth. Since IIP is a volume index, its appropriate analytical counterpart is manufacturing GVO at constant prices. For FY24 and FY25, the two measures recorded remarkably similar average growth — 6.7 per cent for real GVO and 6.6 per cent for IIP indicating strong consistency between the two measures of manufacturing activity. Hence, when we are comparing comparable economic variables, there is convergence in evidence.
Under conditions of synchronised price movement in output and input prices, a growth comparison of manufacturing IIP and manufacturing GVA may also yield defensible results in the short-term. Care is, however, warranted in comparing IIP with GVA, and, while interpreting manufacturing deflator, under conditions of differential input and output price dynamics. The following is the crucial point. Manufacturing is pivotal as both a major supplier and user of intermediate inputs: Intermediate consumption accounts for roughly 81 per cent of manufacturing output, leaving 19 per cent as GVA. Hence, divergences in output and input prices and volumes can generate disproportionate movements in real GVA. This was evident in FY25 — as in Q1FY27 — when input-price inflation exceeded output inflation, resulting in a negative implicit GVA deflator. This is statistically robust and makes economic sense as well. Meanwhile, the gradual decline in the ratio of intermediate consumption to GVO at constant prices is indicative of improving input-use efficiency, consistent with the ongoing product and factor-market reforms.
We have also seen recent analysis juxtaposing India’s economic performance after 2014 with a constructed comparison country, made by combining other countries whose economic performance had assumedly moved closely with India’s before 2014. It uses this historical co-movement to estimate how India’s per-capita GDP might have evolved after 2014. Based on papers by other researchers, the paper faults India’s national-accounts methodology unfairly: It assumes that the alleged overstatement of GDP growth makes the estimated performance gap a “lower bound”, without demonstrating the methodological flaws.
Needless to say, we welcome specific, focused and actionable scrutiny on the GDP methodology, which will lead to constructive outcomes, but not such misleading commentaries and sweeping inferences. Particularly so when the high-frequency, economy-wide indicators corroborate the ongoing growth momentum implied by the headline GDP estimates.
Dev is chairman, Economic Advisory Council to the Prime Minister, Garg is secretary, Ministry of Statistics and Programme Implementation and Cyriac is economic adviser, MoSPI
We have moved to double deflation in manufacturing, under which output and intermediate consumption are deflated separately, with real GVA (Gross Value Added) derived as the difference between their real values. 
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