The GDP debate: India’s growth numbers have a credibility problem

The release of new GDP data has reignited a contentious debate about the accuracy of India's growth figures. Former Finance Secretary Subhash Garg contends that the Ministry of Statistics and Programme Implementation (MoSPI) has overstated growth by manipulating previous year's output. MoSPI counters that Garg is comparing apples to oranges due to the use of different bases and methodologies.

However, the MoSPI's argument may be flawed, as it is possible to have a small implied price increase even with negative deflators. More significant than technicalities, though, is the issue of trust. The government's handling of data has created a trust deficit, as evidenced by past controversies like delayed Census, withdrawn consumption surveys, and significantly understated Covid deaths.

This has led to a "doubt-but-remain-open" approach from the public, raising the burden of proof on the government to validate its data. The controversy surrounding the first quarter's GDP growth is particularly perplexing, given strong macroeconomic indicators such as real sales growth of listed firms, real non-food credit growth, and real export growth.

However, the MoSPI's assumption that unlisted firms and the informal economy performed as well as listed companies may not hold true, especially considering the disproportionate impact of the energy shock on smaller enterprises. Despite these challenges, the government's refusal to release long-term series or address known issues with quarterly GDP numbers further erodes public trust.