Surjit Bhalla writes: GDP data critics protest too much

Critics of India's GDP data have been quick to question its accuracy, but the latest figures seem to support the government's claims. The economy grew by 7.8 per cent in real terms in April-June 2026 compared to the same period in 2025, with nominal growth of 10.3 per cent, resulting in a modest price increase of just 2.3 per cent. This performance appears to be better than many other economies facing similar global challenges such as war and tariffs.

One area of criticism has been the treatment of the deflator, which adjusts for price changes in the economy. Critics argued that India's single deflation method may have overstated production gains. However, the new 2022-23 national accounts series now applies double deflation to manufacturing and agriculture. This correction has not been noted by the critics or even by AI summaries.

Examining the components of the GDP, consumption expenditure rose by 4.4 per cent, above consumer inflation of 3.9 per cent. Import prices increased by 32 per cent, which is a significant factor considering imports make up 28 per cent of GDP. Net indirect taxes fell by 0.4 per cent in rupee terms, even though the volume taxed increased by 3.9 per cent. Additionally, a recent GST cut led to higher spending by Indians, which has translated into a real growth in consumption.

The investment sector has also shown strong growth, with fixed investment increasing by nearly 12 per cent year-on-year. This contributed almost three percentage points to the GDP growth. Bank credit growth has nearly doubled over the past year, and the real policy interest rate has decreased to around 1.3 per cent, creating an environment conducive to investment.

Despite these positive indicators, it is worth noting that India's GDP growth has been downwardly revised twice since 2011-12 and 2022-23. This has raised questions about the reliability of the data, but the cumulative GDP addition since 1980 is still only 11 per cent, which is lower than growth rates in other countries such as Bangladesh (79 per cent), Pakistan (51 per cent), China (36 per cent), and Vietnam (25 per cent).