Reporting source: www.gulf-times.com.
India’s recent GDP growth of 7.8% for the quarter ending June has raised eyebrows, with critics questioning the accuracy of the figures. This growth, reported by the Indian government, surpassed analysts’ expectations of 7.1%, driven by a surge in investments and robust consumer demand.
Subhash Chandra Garg, a former senior bureaucrat in the Finance Ministry, suggested that the growth figures may be inflated due to adjustments made to the previous year’s GDP calculations. He argued that these changes could distort the basis for comparison.
Raghuram Rajan, the former head of the Reserve Bank of India, echoed these concerns, noting that the strong GDP growth has not translated into improved job creation or increased foreign investment. This discrepancy has led some economists to question the reliability of the government’s data.
Critics, including members of India’s opposition, have labelled the reported growth as “statistical gymnastics,” further intensifying scrutiny on Prime Minister Narendra Modi’s administration. This comes amid rising public discontent over job opportunities and corruption in education, highlighted by recent protests that led to the resignation of the education minister.
In response to the criticism, India’s statistics ministry held a press conference to defend the GDP figures. Officials explained that a new methodology adopted in February aimed to provide a more accurate reflection of economic conditions. This change involved revising the nominal GDP for the April-June 2025 period to 80 trillion rupees (approximately $850 billion), down from 86.05 trillion rupees under the previous calculation.
The government clarified that if the old base year had been used, the nominal growth would have been only 2.6%, significantly lower than the reported 10.3%. They emphasized that direct comparisons between the two methodologies are not straightforward.
Additionally, the government noted that the new GDP series incorporates a more detailed Producer Price Index, which includes over 300 deflators for inputs and outputs, compared to about 180 previously. This adjustment is intended to align with globally accepted practices for measuring economic growth.
Despite the controversy, some high-frequency indicators support the government’s claims of a strong economy. For instance, auto sales surged by 21% in August, and bank credit reached a decade-high growth rate of 19%. However, the Purchasing Managers’ Index has shown signs of weakening, indicating mixed signals in the economy.
Economists remain divided on the implications of the new deflator. While some argue that it reflects rising input costs outpacing output prices, others express concerns about the overall strength of economic activity in India.
Follow our Business news coverage for related developments.
