An apple, an orange and 2.6 per cent

Source: The post “An apple, an orange and 2.6 per cent” has been created based on “An apple, an orange and 2.6 per cent” published in “Business Line” on 4th September 2026.

UPSC Syllabus:GS-3-Indian Economy

Context: India’s Q1 GDP growth for 2026-27 has been officially estimated at 7.8% in real terms and 10.3% in nominal terms. However, a competing calculation has claimed that the economy grew by only 2.6%, which has led to questions about the reliability of official GDP data.

Why the 2.6% figure is misleading

1. The 2.6% calculation compares ₹88.27 lakh crore of Q1 GDP based on the new 2022-23 base year with ₹86.05 lakh crore based on the old 2011-12 base year.
2. These figures belong to different statistical series and use different methodologies and coverage, so they cannot be directly compared.
3. When comparable figures are used, nominal GDP growth is around 10.3%, while real GDP growth is around 7.4–7.8%.
4. The 2.6% figure also confuses current-price GDP with constant-price GDP, even though current prices include the effect of inflation.

Need for GDP rebasing

1. GDP needs to be rebased periodically so that it reflects the changing structure and composition of the economy.
2. The 2011-12 base year had become outdated and did not adequately capture the present structure of the Indian economy.
3. The IMF’s 2025 data adequacy assessment identified several weaknesses in India’s national accounts and graded them C.
4. The new GDP series introduced 2022-23 as the base year, along with double deflation and a proper Producer Price Index (PPI).
5. The rebasing was delayed because 2016-17 was affected by demonetisation, 2017-18 by the GST transition, and the following years by the Covid-19 pandemic.
6. Therefore, 2022-23 was considered a more suitable and relatively stable base year.

GDP revisions are a normal practice

1. GDP estimates are regularly revised because better and more comprehensive data become available over time.
2. India’s current GDP estimate is provisional and can be revised until the final estimates are released.
3. Between FY22 and FY25, the old GDP series recorded 25 upward revisions and 12 downward revisions.
4. Similar revisions are undertaken by other major economies such as the United States, the United Kingdom and Japan.
5. Therefore, revision of GDP estimates should not by itself be treated as evidence of manipulation.

Other indicators of economic activity

1. GST collections till August stood at ₹10.42 lakh crore and increased by 11%, indicating strong tax activity.
2. Passenger vehicle sales increased by 25.6%, while August dispatches increased by 35%.
3. Commercial vehicle sales grew by more than 40%, while tractor sales increased by 19%.
4. Cement growth stood at 8.8%, indicating continued construction and infrastructure activity.
5. Exports till July increased by 17%, while net FDI increased from $4.75 billion to $7.8 billion.
6. These indicators provide evidence of economic activity that is difficult to reconcile with a growth rate of only 2.6%.

Balanced view

1. The official 7.8% growth estimate should not be treated as final, because GDP estimates are subject to future revisions.
2. However, criticism of GDP data should be based on comparable figures from the same statistical series and methodology.
3. At the same time, issues such as weak real wages and the availability of good-quality jobs remain genuine concerns that require separate attention.

Conclusion: GDP rebasing is essential for producing more accurate and relevant estimates of economic activity. Therefore, GDP figures should be assessed using consistent methodologies, comparable series and appropriate price measures rather than by mixing figures from different GDP series.

Question: The revision and rebasing of India’s GDP estimates have generated debate over the reliability of economic growth data. Discuss the rationale for GDP rebasing and the importance of using comparable data while assessing economic growth.

Source: Business Line