This was in evidence last week too as India claimed its economy grew by 7.8 per cent in the quarter ended June. Critics promptly questioned the arithmetic and thus began another instalment of India’s increasingly raucous GDP wars. The dispute concerns methodology, base years, deflators, and the various adjustments required to convert the bewildering activity of 1.4 billion people into a single number. Former officials and economists have questioned whether the new GDP series is comparable with the old one. The government insists that critics are comparing apples and oranges. Yet the spectacle has something faintly comical about it. It assumes that there is a precise number called India’s “true” GDP growth, hiding somewhere in the statistical undergrowth and the job of economists is to flush it out.
The GDP figure is only an estimate. Statisticians, like those elsewhere, work with samples, surveys, company accounts, tax returns, and administrative data. Where information is missing, they infer. Where better information subsequently turns up, they revise. Quarterly estimates involve still more inference. India’s problem is more acute than that of many rich countries. The formal economy is increasingly well documented, thanks to goods and services tax (GST), digital payments, and eway bills. But millions of small firms and workers still inhabit the statistical penumbra. Nor would India be the first country to have trouble measuring itself. China’s GDP figures have for years attracted suspicion for their remarkable smoothness. Advanced economies too, with all their statistical machinery, revise GDP estimates.
The new Indian series, with 2022-23 as its base year, attempts to incorporate a much changed economy and newer sources of information. That is surely preferable to continuing indefinitely with an obsolete statistical map. So, the sensible question to ask is whether the 7.8 per cent number makes sense when compared with everything else that the economy is doing. Fortunately, economic actors leave clues everywhere. Start with taxes. The monthly gross GST number has become a favourite measure of economic virility. After two years of double-digit growth, GST growth in 2025-26 was flat on a like-for-like basis, even though that year, GDP growth was 7.1 per cent. Now look at the April-June quarter of this year when the growth rate is claimed to have hit 7.8 per cent. Net GST revenue grew by 7.1 per cent but in this, domestic GST grew by just 2.8 per cent, whereas GST on imports was up by a massive 26 per cent. Apart from GST, all other numbers of the June quarter point to solid expansion. Advance-tax payments, perhaps the most interesting of the lot, increased 15.3 per cent, with corporation advance tax up 16 per cent and non-corporate payments up 12.7 per cent.
The Purchasing Managers’ Index is in expansion territory. Most importantly, India’s perennial weak spot — exports — reported robust growth in April-July. India’s merchandise and services exports rose 13.2 per cent year-on-year. Merchandise exports alone rose 17 per cent. Investment provides another test of whether the GDP figure has a basis in reality. Gross fixed capital formation grew by 11.9 per cent in real terms in the April-June quarter, its fastest pace in 13 quarters. Investment accounted for 34.3 per cent of GDP compared with 31.4 per cent a year earlier. The Centre’s capital expenditure has risen by around 30 per cent in the early months of the financial year.
Big question: Income growth
The big question is whether consumption (which accounts for about 63 per cent of GDP) among the masses, too, is growing. For mass consumption to grow, income growth has to be strong. Unfortunately, real wages have been largely stagnant to declining for years. The Economic Survey 2025-26, citing data, which shows real monthly earnings of male self-employed workers fell from ₹9,454 (2017-18) to ₹8,591 (2023-24) — a nine per cent real decline and rural non-farm wage growth has been near-zero since the pandemic; and agricultural wage growth under two per cent annually. Real salaried wages fell roughly four per cent cumulatively from 2012-24, even as corporate profits record highs. This is the single-biggest doubt one can raise about the 7.8 per cent GDP growth. If the government has to focus on creating genuine long-term growth it has to focus on income growth from manufacturing jobs, preferably funded by large ($80 billion-100 billion a year) of foreign direct investment meant for exports. GDP growth will then automatically take care of itself.
 "gross domestic product, GDP Growth")