Archive · 4 Sep 2026
India’s GDP Momentum Faces Continuing Scrutiny Over Deflator Methodology
India reported that its economy grew 7.8% in the first quarter of FY27.
Several other measures also increased, including vehicle sales, factory equipment production, bank lending and goods transported.
These figures suggest that businesses and consumers were active.
Some academics are not fully convinced because they question how prices are adjusted when calculating real growth.
The authors say India now uses more detailed price information and improved methods.
In manufacturing, the prices of materials used by factories rose faster than the prices of the goods they made.
This can make the calculated price adjustment look unusually low or even negative.
The authors argue that the GDP numbers should be examined carefully but are supported by many other economic indicators.
Real GDP grew 7.8% in Q1FY27, according to the estimates released August 31.
Commercial vehicles, capital goods, machinery imports, construction materials, e-way bills and GST collections all recorded growth.
Critics question whether GDP price adjustments, particularly the deflator, reliably capture economic conditions.
The authors defend the revised national accounts, including producer-price data and double deflation in manufacturing.
They say manufacturing GVO and IIP growth closely matched in FY24 and FY25, supporting the activity estimates.
- Who
- The article’s authors—Dev, chairman of the Economic Advisory Council to the Prime Minister; Garg, secretary of the Ministry of Statistics and Programme Implementation; and Cyriac, an economic adviser at MoSPI—respond to academic critics.
- What
- The authors defend India’s reported GDP growth and the methodology used to calculate real GDP and GVA.
- When
- The discussion follows the June 5 release of FY26 GDP estimates and the August 31 release of Q1FY27 estimates.
- Where
- India.
- Why
- Academic commentators have questioned the reliability of national accounts, especially GDP deflation and manufacturing GVA estimates.
Academic Critics
National Accounts Defenders
Reliability of GDP estimates
Academic Critics
Some academic commentators remain skeptical that the national accounts accurately represent India’s economic performance.
National Accounts Defenders
The authors argue that economy-wide, high-frequency indicators broadly corroborate the growth shown in the headline GDP estimates.
GDP deflator
Academic Critics
Critics question the unusually low or divergent GDP and GVA deflators and whether price adjustments reflect public perceptions of inflation.
National Accounts Defenders
The authors say the estimates use more than 300 producer prices and price indices, and that different output and input-price movements can legitimately produce a low or negative implicit GVA deflator.
Manufacturing activity measurement
Academic Critics
Comparisons between manufacturing IIP and GVA have been used to question the consistency of the national accounts.
National Accounts Defenders
The authors say the appropriate comparison is IIP with manufacturing GVO, whose average real growth was 6.7% versus 6.6% for IIP in FY24 and FY25.
- Q1FY27 real GDP growth
- 7.8%
- Commercial vehicle sales growth
- 18.3% in Q1FY27
- Capital-goods production growth
- 15.2% in Q1FY27
- Machinery and equipment import growth
- 51.5% in Q1FY27
- Gross GST collection growth
- 8.4% in Q1FY27
- Non-food bank credit growth
- 18.3% year-on-year at the end of June, compared with 15.9% in March
- Manufacturing intermediate consumption
- Roughly 81% of manufacturing output, leaving about 19% as GVA