The 7.8% question. When the numbers change, what really changed?

There are few things in public life more comforting than a large number. It has the useful property of making smaller numbers look impolite. So, when India’s new national accounts announced real GDP growth of 7.8 per cent for the first quarter of 2026-27, the temptation was irresistible. Here, apparently, was an economy roaring ahead while much of the world was wondering whether it had enough petrol left in the tank.

But there is a problem with the number, and it is not quite the problem that its loudest critics have identified. Former finance secretary Subhash Chandra Garg has pointed to something considerably more interesting than the familiar accusation that the government has manufactured prosperity. The government’s own estimate of nominal GDP for the first quarter of 2025-26 was originally ₹86.05 lakh crore.

Under the new national accounts series, the same quarter is now valued at ₹80 lakh crore, a reduction of ₹6.05 lakh crore. Garg’s much-discussed 2.6 per cent figure comes from a counterfactual calculation. If the old ₹86.05 lakh crore estimate had been retained, comparing it with the new ₹88.27 lakh crore estimate for the first quarter of 2026-27 would yield nominal growth of roughly 2.6 per cent. This does not mean that India’s real GDP grew by 2.6 per cent. The comparison mixes two different statistical vintages and therefore cannot be presented as an alternative official growth rate.

The government is entirely justified in objecting to that arithmetic as a measure of GDP growth. But that is not the end of the argument. It is actually where the more interesting argument begins.

Why or how did ₹86.05 lakh crore become ₹80 lakh crore? The answer is not that someone simply moved the decimal point while no one was looking. India has introduced an entirely new national accounts series, with 2022-23 as its base year. It incorporates newer household surveys, labour force data, the Annual Survey of Unincorporated Sector Enterprises, MCA corporate filings, GST data, banking information, PFMS records, vehicle registrations and a much broader range of administrative and sectoral information. Supply and Use Tables have also been employed to reduce statistical discrepancies. There is a perfectly respectable statistical case for doing this.

The old 2011-12 based system had well-documented weaknesses. The IMF itself has rated India’s national accounts data adequacy at category C, identifying problems involving informal sector coverage, outdated weights, the use of WPI-based deflators where better price measures were unavailable, excessive reliance on single deflation and inconsistencies between production and expenditure estimates.

A March 2026 paper by Abhishek Anand, Josh Felman and Arvind Subramanian went further, arguing that India may have substantially underestimated growth before 2011 and substantially overestimated it thereafter. Their reconstruction suggests that growth during 2011-23 may have been closer to 4-4.5 per cent than the officially reported 6 per cent or so. That paper is uncomfortable reading for anyone who believes that national statistics should never be questioned. It is equally uncomfortable for anyone who imagines that it has proved the new GDP numbers are fraudulent. The authors explicitly say they have not assessed the quality of the new 2026 series. That question requires time and the new back series. The World Bank’s technical assessment of the rebasing reaches a similarly awkward conclusion.

The new series appears to improve measurement in several respects, particularly of the informal economy. Yet it also produces a substantial downward revision to nominal GDP. Private final consumption expenditure (PFCE) is revised down by about 9.7 per cent. Some services sectors, particularly trade, hotels, transport and communications, are sharply reduced, while financial, real estate, IT and professional services are revised upwards. In other words, India did not suddenly become poorer in 2026. What had changed was not the economy itself, but our statistical estimate of its size. That matters, and so does the deflator.

Nominal GDP in the first quarter rose 10.3 per cent, while real GDP rose 7.8 per cent. The implied GDP deflator is therefore only about 2.3 per cent. The GVA deflator is about 3 per cent. This is low enough to deserve scrutiny, particularly in an economy where food, energy and other prices have not behaved as though inflation had retired to some monastery. But the GDP deflator is not the CPI or the WPI. It measures the price change implicit in the entire GDP basket, including investment, exports and government production. One cannot simply look at consumer inflation and declare the GDP deflator guilty of statistical misconduct. The manufacturing numbers are even more counterintuitive.

The new methodology uses double deflation, deflating output and intermediate consumption separately. If input prices rise faster than the prices of manufactured output, real manufacturing GVA can have a negative implicit deflator. That is not a mathematical error, but it is precisely what the methodology permits. The real question, therefore, should not be whether the deflator looks strange, but whether the price indices, weights, input-output relationships, and PPI coverage used to construct it accurately represent the economy. That is a question for independent scrutiny, not patriotic applause or partisan outrage.

And there is something else that makes the 7.8 per cent difficult to dismiss as statistical fiction. The underlying economy is producing several corroborating signals. Gross fixed capital formation grew by 11.9 per cent, manufacturing GVA grew by 9.2 per cent, tertiary sector GVA grew by 10 per cent, with financial, real estate, IT, and professional services up by 12.1 per cent. Exports increased strongly, capital goods production rose by 15.2 per cent, and electrical equipment rose 27 per cent. Commercial vehicles, household vehicle registrations, cement and steel also recorded healthy increases.

None of this proves that every rupee in the national accounts is perfectly measured. GDP is an enormous statistical construction and not a CCTV recording of economic activity. But it makes it increasingly difficult to sustain the proposition that actual growth was merely 2.6 per cent.

There are warning signs too. Agriculture grew by only 3.6 per cent, and mining contracted; some transport indicators were weak; international air traffic and rail freight were disappointing, and foreign portfolio investors have been leaving Indian markets in substantial numbers. Yet FPI flows are not a GDP metre. They are affected by interest rates, exchange rates, valuations, geopolitics and global risk appetite. One can have strong domestic output and unhappy foreign investors. The two are not mutually exclusive. Nor, for that matter, is GDP a measure of welfare.

An economy can grow rapidly while wages stagnate, employment becomes precarious, inequality widens, and the benefits of growth accumulate disproportionately. A rising GDP indicates the level of economic activity, but it does not tell us who captured the gains, whether productivity improvements translated into better livelihoods, or whether the average citizen feels richer.

So where does this leave us? The 7.8 per cent figure is mathematically valid within the new national accounts framework. The 2.6 per cent figure is not an alternative estimate of real GDP growth, but a counterfactual based on retaining the government's earlier estimate of the base year.

But dismissing Garg’s argument merely by saying that ₹86 lakh crore and ₹80 lakh crore belong to different statistical series misses the central point. The ₹6.05 lakh crore revision is real, and it changes our understanding of the size and composition of the Indian economy. It therefore deserves a transparent sector-by-sector reconciliation that ordinary economists, independent researchers and, ideally, sufficiently caffeinated journalists can reproduce. The new methodology may well be better than the old one, and, indeed, there is considerable evidence that it is. That is precisely why it should be subjected to serious scrutiny.

The proper response to a spectacular number is neither to genuflect before it nor to denounce it as propaganda. It is to ask how it was constructed, what changed, what assumptions went into it, what independent evidence corroborates it, and where the uncertainties remain. A government confident in its statistics should have no difficulty answering those questions. After all, the credibility of a number does not increase just because it is flattering. It increases when even its enemies can audit the arithmetic and still have to concede that it adds up.

(The author is a National Award winner for Best Narration and an independent political analyst. Views expressed are personal.)