‘To bring more clarity’: Centre issues FAQs after oppn red flags GDP figures

NEW DELHI: The Centre on Wednesday released a set of FAQs to clarify the methodology behind India’s latest GDP estimates, after the opposition raised questions over the credibility of the 7.8% growth recorded in the April-June quarter.The ministry of statistics and programme implementation (MoSPI) said the FAQs explain key issues including the use of double deflation, negative implicit deflators, differences between GDP deflator, CPI and WPI inflation, the gap between nominal and real GVA, statistical discrepancies and revisions to the GDP series.The government said the updated annual and quarterly GDP estimates, based on the 2022-23 base year, were released on August 31 using new data sources and methodologies, including the new series of the Output Producer Price Index (PPI) and Banking Services Price Index.The clarification comes after Congress leaders questioned the 7.8% real GDP growth figure and pointed to the revision in the previous year’s nominal GDP estimate.FAQ’s explained by the government:1. How can the manufacturing sector record a negative inflation in GVA implicit deflator of “-1.5%” in Q1, 2026-27 despite increase in both manufacturing output and input prices while the agricultural sector recorded a positive inflation rate of 3.9%?Responding to questions over the manufacturing sector’s negative 1.5% implicit GVA deflator despite rising output and input prices, the ministry said the figure does not mean that manufacturing prices declined.Under the double-deflation method, output and intermediate consumption are deflated separately to arrive at real GVA. If input prices rise faster than output prices, nominal GVA can grow more slowly than real GVA, resulting in a negative implicit deflator.For Q1 FY27, manufacturing nominal GVA grew 7.7%, while real GVA grew 9.2%, resulting in a negative implicit GVA deflator of 1.5%, the ministry said.2. Last year’s Current GDP has been revised down from Rs. 86 lakh crore to Rs. 80 lakh crore, to make current year’s GDP look better. If last year’s number had not been revised, the growth would have been 2.6% in Current prices.The government also rejected the allegation that last year’s GDP was revised down to make the latest growth rate appear higher.The revision in Q1 2025-26 GDP does not represent a deliberate downward adjustment to make the current year’s growth appear higher. It reflects the base-year change, updated data sources, improved methodology and revisions to high-frequency indicators used in GDP compilation.Quarterly GDP estimates follow a benchmark-indicator approach, in which the quarterly estimates are guided by relevant high-frequency indicators. These include crop production, cement production, finished steel consumption and commercial vehicle sales, among several hundred volume and value indicators.The Q1 2025-26 GDP estimate went through several revisions:

The government said the change from Rs 86.05 lakh crore to Rs 80.00 lakh crore was therefore the result of successive revisions to the GDP series, including the change in base year, improved data sources and methodology, and updated indicators. It said it was incorrect to view the revision as an attempt to mechanically increase the current year’s growth rate.The government also stressed that the Rs 86.05 lakh crore figure from the old 2011-12 series cannot be directly compared with the Q1 2026-27 GDP estimate of Rs 88.27 lakh crore under the revised 2022-23 series.For calculating growth, the appropriate comparison is between estimates from the same and latest GDP series. Thus, Q1 2026-27 GDP of Rs 88.27 lakh crore should be compared with the Q1 2025-26 estimate of Rs 80.32 lakh crore under the 2022-23 series, rather than the superseded Rs 86.05 lakh crore figure.The ministry said these revisions reflected changes in the base year, updated data sources, methodologies and indicators.3. How do we reconcile a 2.5% implied GDP inflation rate when consumer inflation (CPI) was 3.9% and wholesale inflation (WPI) was over 9%?On the difference between the 2.5% implied GDP inflation rate, 3.9% consumer inflation and more than 9% wholesale inflation, the ministry said the three measures have different coverage and purposes.While CPI tracks prices paid by consumers and WPI covers wholesale goods and commodities, the GDP deflator covers the broader economy, including investment, government spending, exports and services.The ministry said the GDP deflator is derived from GDP at current and constant prices and therefore need not move in line with either CPI or WPI.4. How does the mechanism of double deflation apply to Private Final Consumption Expenditure (PFCE), and does it enter PFCE calculations directly?The ministry clarified that double deflation is not directly used to calculate Private Final Consumption Expenditure (PFCE), as the method applies to production-side GVA.5. Why is there a large gap between nominal and real GVA growth in mining?The ministry also explained the large gap between nominal and real GVA in mining. It attributed the difference largely to sharp increases in prices of crude petroleum, natural gas and metal ores, even as mining output remained weak in some months.6. The discrepancies are high in both current- and constant-price GDP estimates for Q1 2026-27. Does this mean GDP estimates will be revised significantly in the next round when these discrepancies are adjusted?The statistical discrepancy is a balancing item arising from differences between GDP estimates compiled through the production and expenditure approaches. Its size or movement, by itself, does not indicate that GDP is either overstated or understated.The Q1 2026-27 estimates are based on data available at the current stage and remain subject to revision as more comprehensive and updated information becomes available. As the underlying production- and expenditure-side estimates are revised, the statistical discrepancy may also change.Therefore, the current discrepancy does not imply that GDP will necessarily be revised significantly in the next round. The direction and magnitude of any revision will depend on changes in the underlying estimates and cannot be determined solely from the current discrepancy.At the time of release of final estimates at current prices, the discrepancies will be very insignificant or zero as was found in case of FY2022-23 and FY 2023-24.Congress questions GDP numbersThe government’s clarification follows criticism from the Congress over the latest GDP figures. Congress general secretary Jairam Ramesh cited former finance secretary Subhash Chandra Garg, who argued that if the previous year’s GDP had not been revised, current-price growth would have been 2.6%.“If you had not revised last year’s GDP, the growth in current prices would have been 2.6%,” Garg said in remarks cited by Ramesh.Ramesh said, “PR can polish the picture of GDP, but not the economy itself,” while Congress leader Pawan Khera questioned the revisions and called for greater clarity on the actual growth rate.Union minister Kiren Rijiju hit back at the criticism, asking whether the Congress was in a “state of deep intoxication” or had become so consumed by its opposition to India’s growth that it had lost touch with reality.According to data released by MoSPI on August 31, India’s real GDP grew 7.8% in Q1 FY27, with real GDP estimated at Rs 81.36 lakh crore, compared with Rs 75.46 lakh crore a year earlier. Nominal GDP stood at Rs 88.27 lakh crore, up 10.3% from Rs 80 lakh crore in Q1 FY26. Real GVA grew 8.2% to Rs 73.82 lakh crore.The RBI has projected full-year FY27 GDP growth at 6.7%. The next quarterly GDP estimates, covering Q2 FY27, are scheduled to be released on November 30, 2026.