KOCHI: India's 7.8 per cent GDP growth in the first quarter of FY27 has triggered a debate that appears to be about one number. It is not.
The real disagreement is over how that number should be interpreted, how the new GDP series has changed the picture of the past, and how confidently we can separate real economic growth from the effect of prices.
The first controversy — the 2.6 per cent growth figure cited by some critics — is relatively straightforward. It compares Q1 FY27 GDP calculated under the new series with Q1 FY26 GDP from the old series. That is not an apples-to-apples comparison. Once the previous year's quarter is recalculated under the new methodology, the comparison changes.
Former Finance Secretary Subhash Chandra Garg, however, has raised a different concern. His argument is not simply that the base year has changed — he accepts that methodologies have to change. His concern is the size of the downward revisions to earlier GDP estimates and whether the reasons for those revisions have been adequately explained.
Former RBI Governor Raghuram Rajan has raised yet another question: if the economy is growing this strongly, why has that strength not translated more convincingly into private investment, foreign investment and decent jobs? Importantly, Rajan has clarified that this is a question about the broader economic picture, not necessarily a claim that the latest GDP estimate itself is fabricated.
Then there is the more technical debate over deflators.
New GDP series
The new GDP series has expanded the use of price measures, with more than 300 deflators compared with about 180 earlier, and has introduced greater use of double deflation. In simple terms, a deflator removes the effect of price changes from nominal GDP to arrive at real growth.
This matters because a rise in the value of production can come from producing more, charging higher prices, or both. Double deflation attempts to measure output and intermediate input prices separately, giving a more precise measure of real value added.
But precision depends on the quality of the underlying price data.
Surjit Bhalla has defended the new numbers, saying he sees no evidence of political manipulation or artificial inflation. He points to investment and other components of the national accounts as evidence that the headline growth is not standing in isolation. At the same time, he has acknowledged that questions about the accuracy of the data are legitimate.
This leaves one particularly important issue for the reader: the missing historical bridge.
Changing the methodology is not itself a problem. In fact, not changing it as the economy evolves would be a bigger problem. The new series uses a 2022-23 base instead of 2011-12 and incorporates newer data sources and measurement techniques.
But when the measuring instrument changes, the past needs to be recalculated with the same instrument if we want to understand the growth trajectory properly.
Back-series vital
That is what the back-series will provide.
Its absence does not invalidate the 7.8 per cent. Nor does it prove that the new estimate is exaggerated. What it does is leave the reader without the complete historical picture under the new methodology.
And that is perhaps where the GDP debate has become unnecessarily polarised.
Garg is questioning the magnitude and explanation of the revisions. Mishra is right to point out that old and new series cannot simply be mixed. Bhalla finds no evidence of manipulation, but the deflator issue remains a technical question worth examining. Ahluwalia has argued that the large revisions deserve technical scrutiny.
They are, in effect, asking different questions about the same number.
So the debate need not be reduced to whether 7.8 per cent is “true” or “fake”.
The more useful question is: what does 7.8 per cent actually tell us about India's economy — and do we yet have enough comparable historical and price information to understand it fully?
The 7.8 per cent may be the headline.
But it isn't the whole story.dline. But it is not the whole story. I
