India's Chief Statistician, Pronab Sen, expressed serious concerns during a phone call with Asit Ranjan Mishra regarding the latest Gross Domestic Product (GDP) data and the criticism he does not share.
He noted that it is difficult to judge the reliability of the 7.8 percent GDP growth in the first quarter (April-June) of 2026-27, given significant downward revisions observed recently. Sen emphasized that the initial quarterly GDP estimate is based on extremely weak data, and history shows substantial declines.
Although his personal hypothesis leans towards the nominal growth of 10 percent being likely correct, his main question concerns the price deflators used to determine real GDP growth.
Discussion of Disputes Surrounding First Quarter GDP Figures
The first quarter GDP figures have become a subject of active debate. Sen mentioned reading criticism only from former Finance Secretary Subhash Chandra Garg. He disagrees with this criticism, asserting that the common practice is to compare the latest estimate with the most recent revised estimate.
Regarding the sharp decline in nominal GDP for the first quarter of 2025-26 upon changing the base year, Sen suggested there could be several reasons. When a base revision is conducted, corrections are made to all previously inflated figures, and in this case, the 7-8 percent decrease is linked to correcting past GDP overestimations, in his view.
Questions Regarding the Methodology of the New GDP Series
The main problem with the new GDP series, according to Sen, is the methodology itself. Although the changes introduced into the system are legitimate, desirable, and were known previously, they were not applied due to a lack of necessary data. Sen pointed out issues related to prices and price indices.
He noted that double deflation is a positive change requiring much more data than single deflation, which only requires data on the price of final goods. Double deflation requires prices not only for final goods but also for all intermediate goods, representing a significantly larger volume of goods. Sen saw no evidence of such data existing.
The Ministry of Statistics and Programme Implementation (MoSPI) used the Producer Price Index (PPI) in the double deflation. However, it is unknown whether the input price index was used, as it is still in the experimental stage. Sen expressed concern about whether input prices were collected and used, and why they were not disclosed.
MoSPI stated that 'sources and methods' would be published within two weeks. Sen reminded that the new base estimates were published last year and should have been available sooner.
Other Concerns
The second point raising questions is the PPI. For over two decades, it has been impossible to calculate the PPI because producers refused to provide prices, citing commercial confidentiality. In contrast, the Wholesale Price Index (WPI) represents a market price for which quotes can be obtained.
Sen also noted that a single price is often absent because a producer may sell to large and small distributors at different prices, requiring them to provide an average. He doubts whether such data could be collected unless Indian companies became very cooperative.
He believes that MoSPI should wait until the PPI series matures before implementing it as a deflator. The correct practice is to launch two datasets in parallel to compare results.
Another contentious issue is the real production growth rate of 9.2 percent, where the deflator became negative (-1.5 percent). Sen explained that this is possible under double deflation but impossible under single deflation.
MoSPI argued that there is no reason for the GDP deflator to follow the Consumer Price Index (CPI) or WPI, as their coverage differs. Sen found it suspicious that the deflator was 2.5 percent in a quarter when the WPI was close to double-digit figures, considering the transition from WPI to PPI and the application of double deflation.
In the UK or Australia, researchers can reconstruct most of the GDP calculation thanks to detailed demand and use data, which is not happening in India due to the non-publication of source data. Sen insists on the necessity of releasing this data at a certain level of aggregation to ensure transparency.
He also demanded clarification on how the GDP was calculated and where the data for the PPI came from, pointing out the need to restore and expand the Survey of Use and Demand (SUT), which has effectively ceased production.