New Robes for India’s GDP: The Reality of Modi Govt's Growth Story

The Modi government's 'highest GDP growth' rhetoric rests on the so-called 'real GDP'—a manufactured number.

A file image of Union Finance Minister Nirmala Sitharaman and PM Modi.

(Photo: The Quint)

The Indian government's National Statistical Organisation (NSO), part of the Ministry of Statistics and Programme Implementation, has released India’s gross domestic product (GDP) numbers in a new series, with 2022-23 as the base year.

India measures its GDP in two modes—nominal (production of goods and services at prices prevailing during the year, or current prices) and real (production of goods and services during the year, at base year prices). The nominal and real GDP is the same for the base year.  

There is one more measure of GDP, which is extremely important in the current globally integrated world—GDP in the global currency, currently the US dollar.

What is the new reality of India's GDP in all these three measures—real, nominal, and in US dollars? Is there good news or bad, or is it mixed? 

Real GDP is Notional 

All goods and services are produced, traded, sold, and bought in current prices. The GDP is thus primarily measured in current prices. Real GDP is derived by deflating the current GDP by the rise in prices during the year, or the inflation as we know.  

Measuring inflation is tricky and imperfect. There is no single and complete measure of inflation. India has been using Consumer Price Inflation (CPI) and Wholesale Price Inflation (WPI) to capture inflation at the consumers' and producers' ends.

India’s CPI suffered from an unrepresentative consumer consumption basket. Many modern goods and services, especially discretionary, were not included in the CPI. Food and basic consumption needs over-dominated. Despite being recently revised and updated, the CPI does not rightly and fully capture India’s consumer inflation. It also fluctuates wildly.

India is still to modernise its WPI, globally constructed as Producer Price Index (PPI). Astonishingly, India’s WPI does not include any services, whereas services are bulk produced for use in goods production systems and wholesale consumption. WPI inflation is, therefore, thoroughly unrepresentative of producers’ inflation in India.  

There has also been controversy over the application of inflation measures while deflating the nominal GDP—single deflation, double deflation, sectorally or totally. Going into all this will make this story unnecessary complicated. The new GDP series does try to address it. 

As a result, inflation deflator used is quite unrepresentative of actual inflation. No wonder, when the sole factor which converts nominal GDP into real GDP is defective, the outcome—the real GDP is quite poor and notional.

The government and economists tend to over-hype real GDP. It does not serve that much purpose. Whenever the base changes, real GDP numbers undergo massice change also.

India’s real GDP for 2022-23, in the old series (base 2011-12) was Rs 161.65 trillion. In the new GDP series (base 2022-23), it is Rs 261.18 trillion. What was real GDP in 2022-23—Rs 161.65 trillion or Rs 261.18 trillion?  

Real GDP is of any meaningful use only if the inflation deflator is measured currently. The real GDP does not do it. Measuring inflation rightly does it and produces more accurate real GDP.

Nominal GDP is Real GDP 

The producers produce and sell their goods and services at current prices and account for it accordingly in their quarterly and annual accounts and reports. Ministries, departments, and other compiling organisations collect production and consumption data in current prices. The NSO conducts many surveys to compile these data in current prices. Everyone trades and makes payments in current prices.  

The nominal GDP is, therefore, the real GDP. It is also increasingly mimicking the real GDP in the world where inflation is low, and supplies exceed demand for most goods and services.  

The new GDP series finds India’s nominal GDP to be far lower than the old series. India’s nominal GDP for 2025-26 is Rs 345.47 trillion. In the old series, it was Rs 357.14 trillion. The new series is much more representative of current production and consumption in the country. It can, therefore, be taken as more accurate.  

The new series tells us that India’s nominal GDP has shrunk by as much Rs 11.67 trillion, or about 3.27 percent.

The contraction is more than the entire production value added of India’s mining and quarrying sector (Rs 5.09 trillion) and electricity, gas, water supply and other utility sectors (Rs 8.17 trillion).  

This is indeed significant and a very bad news, which the new GDP series has honestly communicated.  

Why Did it Happen? 

The culprit was 2023-24 GDP. It was measured at Rs 301.23 trillion in the old series. In the new series, it is 289.84 trillion, a difference of Rs 11.39 trillion, almost equal to the difference in 2025-26 of Rs 11.67 trillion.  

Did the NSO/government play with the 2023-24 nominal GDP?  

The 2023-24 nominal GDP was reported at Rs 296.58 trillion in the 5 January 2024 advance GDP press release. It was reduced to Rs 295.36 trillion in the preliminary estimates of 2023-24 GDP released in May 2024, which was repeated in the 2024-25 advance GDP press release in January 2025.

Quite unexpectedly, a month later, in the press release in February 2025, the nominal GDP of 2023-24 was suddenly raised to Rs 301.23 trillion—an increase of about 5.87 trillion, about half of the inflated nominal GDP of 2023-24, as the new series tells us now.  

Did the NSO know the real nominal GDP of 2023-24 in February 2025 when it was announced as the final estimates? Was it to be reduced by Rs 5.87 trillion instead of being increased? Was it unintentional or deliberate misrepresentation of data? 

It is worth remembering that 2023-24 was the last year of Modi 2.0. The Modi government’s economic performance was quite terrible in that five-year period. A deliberate attempt to put it a somewhat better light cannot be ruled out. Let it be found out. 

Real Bad News is for Dollar GDP 

The International Monetary Fund (IMF) converts all countries' nominal GDP in current US dollars to make it comparable across the world.  

India’s projected GDP for 2025-26 (IMF includes India’s financial year GDP in its calendar 2025 assessment) is $4.13 trillion. A Rs 345.47 trillion GDP equals $4.13 trillion only at the dollar-rupee exchange rate of 83.65.   

The current dollar-rupee exchange rate exceeds 91. Even if we take Rs 90 to a dollar for the year 2024-25 as a whole, India’s Rs 345.47 trillion GDP shrinks to $3.84 trillion—a less than $290 billion—by more than 7 percent.  

The IMF has assessed India’s 2024-25 GDP at $3.91 trillion. The GDP of $3.84 trillion for 2025-26 is lower than the 2024-25 GDP.  

The new series GDP data completely wipes out dollar GDP growth in 2025-26, making it a washout year. That indeed is a very bad news.  

GoI Must Tone Gown its GDP Growth Rhetoric  

The government has been tom-toming India's "highest GDP growth" story for long now. The government, however, has been conveniently setting this rhetoric in terms of the so-called "real GDP", which is quite a notional and manufactured number.

The nominal GDP and the dollar GDP are the real GDP. In dollar GDP, India would be revised down to a negative growth in 2025-26. Even if the IMF makes retrospective revision from 2022-23 to 2024-25, India’s nominal GDP growth of 8.6 percent, discounted by about 6 percent depreciation of the rupee in the year, would be only about 3.5 percent—one of the lowest growth rates.  

The Prime Minister had "guaranteed" that India, under his leadership, would become the third largest economy by 2028-29, before the next Lok Sabha elections in May 2029. With India’s performance down in the dumps and Japanese and German economies generating some growth, and their currencies appreciating against the US dollar, the probability of this guarantee failing is becoming higher by the day.

It pays to be circumspect and conservative, not boastful, to remain credible.

(Subhash Chandra Garg is the Chief Policy Advisor, SUBHANJALI, and Former Finance and Economic Affairs Secretary, Government of India. He's the author of many books, including 'The $10 Trillion Dream Dented, 'We Also Make Policy', and 'Explanation and Commentary on Budget 2025-26'. This is an opinion piece, and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)