Why India’s strong GDP growth is raising eyebrows

India’s economy grew faster than expected, but the 7.8% figure has triggered an argument over how the country measures growth. The result exceeded the 7.1% forecast in a Reuters poll and reflected an investment boom, stronger manufacturing and solid consumer demand.

The dispute began after Subhash Chandra Garg, a former senior Finance Ministry bureaucrat, said the expansion appeared inflated because the government had reduced its estimate for the year-earlier period used as the comparison base. Raghuram Rajan, the former Reserve Bank of India governor, questioned why the headline growth rate had not produced stronger job creation, domestic investment or foreign portfolio inflows.

Some private economists also challenged the GDP deflator, which strips inflation from nominal output to calculate real growth. They said it may have understated inflation compared with other price indicators. India’s opposition used the controversy to attack Prime Minister Narendra Modi’s government, with a senior Congress official calling the figure “statistical gymnastics”.

The government responded through a news conference organized by the statistics ministry. A senior official defended a revised methodology introduced in February after what he described as extensive consultations. The new series reduced the nominal value of April-June 2025 GDP to 80 trillion rupees, or $850 billion, from 86.05 trillion rupees under the old series.

Officials said the revised system also changed the base year, updated data sources and refined the goods and services included. They argued that comparing figures from the old and new systems directly was not valid. The government reported a 2.3% deflator for the quarter, below retail inflation, while the statistics secretary said quarterly revisions had moved in both directions over the past three years and annual changes had remained relatively small.

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Statistical gymnastics