How India achieved 7.8% GDP growth in Q1: Govt explains via 6 questions

India’s 7.8 per cent economic growth in the April-June quarter has come under scrutiny after the Opposition questioned the methodology behind the latest GDP estimates, particularly a sharp revision in the previous year’s GDP and the relatively low inflation implied by the new numbers.

The government has rejected suggestions that the data were manipulated to make growth appear stronger. The Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday issued a detailed six-question explanation, addressing the new GDP series, the use of different price indices, the negative implicit deflator for manufacturing, the sharp revision in last year’s current-price GDP and the statistical discrepancy between different approaches to measuring the economy.

The debate comes after India reported 7.8 per cent real GDP growth in the first quarter of FY27, significantly above the 7 per cent forecast of the Reserve Bank of India and the 7.1 per cent median estimate of economists. The economy had expanded 8.6 per cent in the previous quarter.

The latest estimates put real GDP at Rs 81.36 lakh crore in Q1 FY27, compared with Rs 75.46 lakh crore a year earlier. Nominal GDP, which is measured at current prices, grew 10.3 per cent to Rs 88.27 lakh crore.

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Why has the 7.8% growth figure become controversial?

The main dispute is not over whether the economy expanded. It is over how that growth has been calculated under the new GDP series.

The government changed the GDP base year from 2011-12 to 2022-23 in February. The new series also introduced changes to the way prices are used to convert current-price economic activity into real, inflation-adjusted growth.

One of the biggest points of contention is the treatment of Q1 FY26.

Under the old 2011-12 series, current-price GDP for Q1 FY26 was initially estimated at Rs 86.05 lakh crore. Under the new 2022-23 series, it was revised to Rs 80.32 lakh crore in February. It was subsequently revised to Rs 80.44 lakh crore in June and now stands at Rs 80 lakh crore following updated data.

Critics argue that such a large downward revision makes the 7.8 per cent growth rate look stronger.

The government, however, says the old and new series cannot be directly compared. It argues that the correct comparison is between Q1 FY27 GDP of Rs 88.27 lakh crore and the revised Q1 FY26 figure calculated under the same methodology.

1. Why does manufacturing have a negative inflation rate?

Manufacturing’s nominal GVA grew 7.7 per cent in Q1 FY27, while its real GVA increased 9.2 per cent. That implies a negative implicit GVA deflator of around 1.5 per cent.

At first glance, that appears counter-intuitive because prices of several industrial inputs increased during the quarter.

The explanation lies in a methodological change. The new GDP series uses double deflation for manufacturing. Instead of applying one broad price index to the entire sector, statisticians separately adjust the value of manufacturing output and the cost of intermediate inputs.

If the prices of inputs rise faster than the prices of finished goods, nominal value added can grow more slowly than real value added. The resulting implicit deflator can therefore become negative.

MoSPI said this was particularly relevant for industries such as textiles, cotton ginning, basic metals and rubber and plastics.

In simple terms, a manufacturer can produce more in real terms while its value added in current prices grows more slowly because the cost of inputs has risen sharply.

2. Why was last year’s GDP revised down by around Rs 6 lakh crore?

Q1 FY26 current-price GDP was originally put at Rs 86.05 lakh crore under the old GDP series. Under the new series, the corresponding figure was first estimated at Rs 80.32 lakh crore and has now been revised to Rs 80 lakh crore.

The government has rejected the suggestion that this was done to artificially lift the latest growth rate. Its argument is that the new series uses a different base year, data sources and price methodology. Therefore, the Rs 86.05 lakh crore figure calculated under the old series cannot simply be used as the base for calculating growth in Q1 FY27.

The appropriate comparison, the government says, is between numbers produced under the same series. This distinction is important because real GDP growth is calculated after adjusting nominal economic activity for price changes. Changing the underlying methodology can therefore alter both the level of GDP and the growth rate.

3. Why is GDP inflation lower than CPI and WPI inflation?

India’s consumer price inflation was around 3.9 per cent during the period, while wholesale inflation was above 9 per cent. Yet the implicit inflation rate derived from GDP was around 2.5 per cent.

The government says there is no contradiction. CPI measures changes in prices paid by consumers for a defined basket of goods and services. WPI largely tracks wholesale prices of goods, including commodities, raw materials and manufactured products.

The GDP deflator is much broader. It covers the entire domestic economy, including household consumption, investment, government spending, exports and a wide range of services such as banking, information technology and real estate.

It is also calculated using hundreds of individual price deflators rather than relying on a single inflation index. As a result, the GDP deflator can move very differently from CPI or WPI.

4. Does double deflation affect household consumption?

No. MoSPI has clarified that double deflation is a production-side methodology used to calculate GVA. It does not directly determine private final consumption expenditure, or PFCE.

PFCE is calculated from the expenditure side of the national accounts, using item-wise estimates and appropriate volume and price indicators.

This distinction matters because GDP can be measured from different sides of the economy — production, expenditure and income — and the methodology used for one component does not automatically apply to all others.

5. Why did mining GVA fall in real terms but rise sharply in nominal terms?

Real mining and quarrying GVA contracted 2.4 per cent in Q1 FY27. But nominal GVA jumped 22.3 per cent.

The reason was a sharp rise in mining prices. Mining output, as measured by the Index of Industrial Production, declined 3.8 per cent in April and 1.4 per cent in May before recovering to 1.6 per cent growth in June.

At the same time, mining prices rose sharply. The price increase was particularly pronounced for crude petroleum and natural gas, with inflation reaching as high as 72.2 per cent in May.

This meant that the sector generated substantially more value in rupee terms even though its physical output was weak.

The contrast illustrates why nominal and real GDP can tell very different stories about the same sector.

6. What is the statistical discrepancy and does it mean GDP will be revised sharply?

Not necessarily. GDP is estimated through different approaches, including the production and expenditure sides. Ideally, both approaches should produce the same result.

In practice, differences arise because the underlying datasets are compiled from different sources and become available at different times.

That difference is recorded as a statistical discrepancy. MoSPI has said that a large discrepancy in a provisional estimate does not automatically mean that GDP will undergo a major revision later. As more complete information becomes available, the estimates are revised.

In some final estimates, the discrepancy can become very small or even disappear.

Government’s defence of the 7.8% growth number

The government’s broader argument is that the latest GDP data are supported by several independent indicators.

Sanyal said the stronger economic performance was visible in corporate profitability and automobile sales, arguing that the GDP numbers should not be viewed in isolation.

The latest data also show a pickup in investment. Reuters reported that private investment strengthened during the quarter, with gross fixed capital formation rising to 34.3 per cent of GDP from 31.4 per cent a year earlier. Corporate capital expenditure had also increased in FY26.

Credit growth and factory utilisation have also improved, providing support for the argument that private-sector activity is becoming a more important driver of growth.

What the critics are saying

The Opposition has questioned the credibility of the new methodology. Congress leader Jairam Ramesh has argued that the gap between nominal and real GDP should broadly reflect the economy’s inflation rate. He has questioned why the implicit GDP inflation rate is substantially lower than WPI inflation.

The Congress has described the latest numbers as “statistical gymnastics” and alleged that changes in methodology have made the headline growth rate look stronger than the underlying economy.

Garg has taken a more technical position. He has pointed to the sharp revision in current-price GDP and the absence of a directly comparable new-series number when the original Q1 FY26 estimate was released.