The government machinery was on an overdrive the last few days responding to one former bureaucrat who wrongly debunked the robust growth estimates for April-June 2026. The bureaucrat, Subhash Chandra Garg, was the Economic Affairs Secretary in the Ministry of Finance for over two years from June 2017 to July 2019, and was designated the Finance Secretary in his last four months in the ministry. The Finance Secretary is the ‘first among equals’ in the Ministry which has six secretaries now, each heading one of the six departments — Expenditure, Revenue, Economic affairs, Financial Services, Investment and Public Asset Management, and Public Enterprises.
The government was spooked after Garg claimed in an interview to a television channel (NDTV) and later wrote in a piece for an online site (thequint.com) that the nominal GDP (Gross Domestic Product) growth rate in the first quarter of 2026-27 was a ‘lowly’ 2.6 per cent, and not 10.3 per cent as estimated by the Ministry of Statistics and Programme Implementation. Adjusted for 2-2.5 per cent inflation, he claimed the real growth rate will be zero and not the ‘designer number’ 7.8 per cent estimated by the Ministry of Statistics and Programme Implementation (MoSPI).
In doing so, Garg did something egregious. He definitely knows better than this, having played a key role in pushing through some of the most controversial agendas in the first term of the Narendra Modi government such as electoral bonds for political funding, and higher surplus transfers from RBI to the Centre. He elaborates on both these issues in his book We Also Make Policy.
Everybody got Garg’s wrong maths, but what also matters in the street is perception. Garg’s claims, though misleading, resonated with some, coming as they did in the backdrop of the Jantar Mantar protests, an education system that admittedly does not leave its graduates ‘job ready’, and a demography which pushes more than a crore youth into the job market every year.
Not surprising then, the Congress and some of its leaders pounced on this and amplified it. But what is surprising is that Rahul Gandhi, who is a strong critic of the economic policies of the Narendra Modi government, chose prudently not to comment on Garg’s claims. His silence was loud and meant wrong maths can’t be defended.
Rajya Sabha member Praveen Chakravarty, hit out at the government’s economic management, but said in a piece for a newspaper that “there is a lot that is wrong with India’s economy… but the sheer math behind the 7.8 per cent real GDP growth is not one of them, contrary to what a former government bureaucrat has claimed”.
But Subhash Garg did leave the government firefighting much of the week after the GDP estimates were released. To reject what he said, it is key to understand two concepts: i) why is a base year needed while calculating GDP growth rate, and ii) why is the base year changed once in every 5-6 years, and when this is done, how is GDP calculated.
Concept 1: Need for a base year. Simply put, a base year is needed to understand if the economy or the GDP has indeed grown, adjusting for the impact of price rise. For example, let’s assume Country X produces only crude oil, so the market value of its crude oil becomes its GDP. Say, in year 1, it produces 10 million barrels of crude oil and sells it for $10 a barrel; its GDP will be $100 million (10 million barrels X 10/ barrel). In year 2, it produces only 5 million barrels, and oil prices have risen to $30 a barrel. So, its GDP will be $150 million (5 million barrels X 30/ barrel). So, even though the country has produced less oil, its GDP has risen 50 per cent from $100 million to $150 million. A base year helps tell the real GDP growth by removing the impact of prices. If year 1 is taken as the base year, the oil price of that year becomes the reference for the following years. So, the real GDP of year 2 will be $50 million (5 million barrels x $10 a barrel, which is the price of crude oil per barrel in the base year). So, in this example, the GDP has shrunk by 50% to $50 million from $100 million.
Concept 2: Why the base year is changed. Products and services on which people spend money today, be it food and clothes or travel and entertainment, has changed significantly from a decade ago. As years roll by, the market value of products and services change. So does technology and methodology, that enable a more precise and fast capture of output and prices. The base year is changed to account for all these. And when the base year changes, the GDP values naturally change, and growth is calculated by considering the new GDP values of two comparable periods.
When MoSPI changed the base year from 2011-12 to 2022-23 in February this year, the GDP values changed for all years from 2011-12 till date. Garg took the GDP value of April-June 2025 calculated using the 2011-12 base year and the GDP value of April-June 2026 calculated using the 2022-23 base year, to calculate the first quarter GDP growth rate for this year. Using numbers from two different series is patently wrong.
The writer is Managing Editor, The Indian Express. Off the Record is a fortnightly column
When MoSPI changed the base year from 2011-12 to 2022-23 in February this year, the GDP values changed for all years from 2011-12 till date. (File) 
Share
