GDP dust settles, but trust emerges as the real fault line

The dust over the Narendra Modi government's release of GDP data is eventually beginning to settle. Whether the country has recorded a nominal growth of 10.3% or 2.6% depends on the perception one is peddling.

The issue was first raked up when former Finance Secretary Subhash Chandra Garg argued that India’s GDP for the first quarter (April, May and June) would have shown nominal growth of only 2.6% had it been based on the old GDP series with 2011-12 as the base year, which the Centre changed to 2022-23 in February this year.

This sparked a debate around two central questions. First, was Garg comparing Q1 2026 from one data series with Q1 2025 from another -- effectively comparing apples and oranges, as many of his critics point out?

Second, did the government actually revise the Q1 2025 estimate from the initial Rs 86 lakh crore to Rs 80 lakh crore to make the Q1 2026 figures appear more impressive?

In an exclusive interaction with India Today TV, India's two former chief economic advisors have offered sharply contrasting assessments of India’s latest GDP numbers, with Arvind Subramanian questioning the credibility and transparency surrounding the data, while KV Subramanian rejected the alternative 2.6% growth estimate as “absolutely bogus.”

Speaking to India Today TV, Arvind Subramanian said the government was half right technically and directionally on the latest numbers, acknowledging that economic activity appeared to be improving. However, he said the government had “a lot to answer for” over the magnitude of the 7.8% growth figure.

“The government is sort of half right, technically and kind of directionally on the numbers, i.e., things are improving. But on the magnitude of the 7.8% growth itself, how it is felt, the larger doubts raised by the critics, I think the government has a lot to answer for,” he said.

HUGE TRUST DEFICIT: ARVIND SUBRAMANIAN

Even while cautioning that the real 7.8% GDP growth figure should be taken with a pinch of salt, Arvind Subramanian said former Finance Secretary Subhash Garg’s calculation of 2.6% growth was technically flawed and "overstated" because it compared figures from the old and new GDP series.

He described it as an “apples to oranges” comparison. According to him, the revised 2022-23 figure should be compared with the corresponding figure under the new methodology.

However, speaking about Garg, Subramanian said there was a “kernel of truth in the spirit of what he is saying”, pointing out that Garg had raised a broader and legitimate question about why the earlier GDP estimate was revised downward, particularly amid a wider trust deficit over the government’s handling of data in recent years.

The controversy arose after the previous year’s GDP estimate, earlier cited at around Rs 86 lakh crore, was revised to nearly Rs 80 lakh crore under the new series. Garg argued that the revision significantly affected the growth calculation and questioned what the growth rate would have been without it.

Arvind Subramanian said there could be plausible reasons for the new base year and the subsequent downward revision, including the availability of more data on the informal sector showing slower growth than previously estimated under the old series.

But he criticised the government for not making the underlying data and methodology sufficiently clear before the latest figures were released.

He pointed to the delayed census, withdrawal of the 2017 consumption survey, what he described as the underestimation of COVID deaths and exaggerated claims on open defecation as factors behind the wider trust deficit.

“The normal would be trust and verify, but because of the government's track record, it is doubt first and then show me that my doubts are misplaced,” he said.

Having served in the Narendra Modi government for almost the entirety of its first term, Subramanian argued that the burden of proof was now on the government to explain how the GDP numbers were calculated and why earlier estimates were revised.

The former chief economic advisor said the GDP numbers appeared “decoupled” from, or disconnected from, the felt reality of the economy, making them difficult to reconcile with broader economic reasoning, particularly against the backdrop of the energy shock from the West Asia conflict.

“If GDP growth is so high, why is there no employment growth? Why is wage growth so weak? Why is private investment so weak? Why is there so much unrest among the poor?” he asked.

Subramanian said these concerns were reflected in objective indicators, including declining foreign direct investment, a weakening rupee and other signs of economic stress.

He also questioned the government's claim that India has been growing at around 8% consistently over the past three to four years. If that were the case, he asked, why had investors been fleeing the country?

“These are objective data,” he said, arguing that they were supported by associated indicators that broadly mirrored what people were experiencing on the ground.

2.6% CLAIM ABSOLUTELY BOGUS: KV SUBRAMANIAN

KV Subramanian, who served as CEA under the Narendra Modi government, took a markedly different position. He rejected Garg’s 2.6% calculation outright, calling it absolutely bogus and saying it was based on egregious conceptual errors.

He said the comparison was effectively like measuring weight in pounds one year and kilograms the next and then claiming that the person had lost weight.

KV Subramanian also rejected the suggestion that the downward revision was made to make the latest GDP growth rate look higher.

He pointed out that the new methodology was announced in February, well before the latest GDP figures were released. “Any insinuation that this number was lowered now to actually show the GDP higher, there is no way in February they would’ve known what the number would be in September or in end of August,” he said.

He said revisions to economic data are common across countries and pointed to revisions in US economic statistics as an example.

According to KV Subramanian, India’s rapidly changing economic structure and boom also requires regular revisions to GDP estimates, particularly as the digital and informal sectors evolve.

'I TRUST THESE NUMBERS'

KV Subramanian said he trusted the latest GDP figures and rejected both the 2.6% estimate and a 5% growth interpretation. “Bottom line is I trust these numbers,” he said. “It may be slightly more or slightly less than 7.8%, but it is not 2.6%, nor is it 5% for sure.”

He cited several indicators that he said supported stronger economic activity, including double-digit growth in passenger and transport vehicle sales.

He also pointed to a 12% rise in capital expenditure by listed companies, an 11% increase in government investment, 20% growth in bank credit, 16% growth in capital goods production and 15% growth in construction activity.

KV Subramanian said consumption and investment together account for about 90% of GDP and argued that the performance of these indicators was inconsistent with a 2.6% growth rate.

SHARP EXCHANGE OVER TRUST DEFICIT

The two former CEAs also differed directly over the question of credibility. KV Subramanian rejected Arvind Subramanian’s criticism of the government’s data record, arguing that Arvind Subramanian himself had previously estimated that India’s GDP was overestimated.

He referred to an estimate made by Arvind Subramanian in 2019 that GDP was overestimated by 2.9%, arguing that the subsequent revision did not support that assessment.

KV Subramanian said that if the GDP had actually been overestimated by 2.9% over the period in question, the eventual revision would have been much larger.

He accused critics of applying different standards when interpreting GDP figures depending on whether the numbers were high or low.

BOTH SEEK GREATER EXPLANATION

Despite their differences, both economists agreed that the government should provide greater clarity on the GDP data and methodology.

Arvind Subramanian called for “absolute total transparency”, including publication of the data, methodology and explanations behind the revisions.

KV Subramanian also agreed that the questions should be answered upfront and that a complete sources-and-methods document would help independent economists examine how the figures were calculated.

However, he maintained that the available economic indicators broadly support the reported 7.8% growth. Arvind Subramanian, meanwhile, argued that if the government uses strong exports, credit, auto sales and other indicators to validate the latest growth figure, the same logic should be applied to previous years.

“If you want to be believed, not only should you make everything explicit, you should also come clean and acknowledge the kind of overestimation in the past,” he said.

He argued that the government could not use supporting indicators to validate the latest GDP numbers while applying a different standard to earlier estimates.

KV Subramanian, however, said the latest GDP numbers were “absolutely trustworthy”, while allowing that the precise growth rate could be slightly higher or lower than 7.8%.