A new study raises questions about the accuracy of India’s GDP growth estimates, suggesting significant miscalculations over the past two decades that could reshape the understanding of the country’s economic trajectory.
A recent academic study has reignited a longstanding debate regarding the reliability of India’s economic growth statistics, indicating that the country’s GDP may have been misestimated for nearly two decades. The working paper, titled “India’s 20 Years of GDP Misestimation: New Evidence,” was authored by Abhishek Anand from the Madras Institute of Development Studies, Josh Felman of JH Consulting, and Arvind Subramanian of the Peterson Institute for International Economics.
The authors argue that India’s economic growth was likely underestimated during the boom years of the mid-2000s and subsequently overestimated in the following decade. They estimate that India’s annual growth between 2005 and 2011 may have been understated by approximately 1 to 1.5 percentage points, while growth from 2012 to 2023 may have been overstated by about 1.5 to 2 percentage points.
When these adjustments are applied, the narrative of India’s economic trajectory shifts dramatically. Instead of a consistent high growth rate over the past two decades, the economy appears to have experienced a strong boom in the mid-2000s, followed by a period of slower—but still respectable—growth.
The study suggests that between 2011 and 2023, the Indian economy likely expanded at an annual rate of around 4 to 4.5 percent, significantly lower than the approximately 6 percent average growth indicated by official statistics.
Concerns regarding the accuracy of India’s GDP data have circulated among economists for years, particularly after the government adopted a new methodology for calculating national income in 2015. Critics have pointed out that the revised figures sometimes seem inconsistent with other economic indicators, such as exports, credit growth, electricity consumption, tax revenues, and industrial production.
The new paper seeks to rigorously evaluate these concerns by comparing official GDP estimates with various macroeconomic indicators and examining the methodology used to derive the data. The authors note that skepticism about the numbers arose partly because GDP statistics suggested consistently strong growth, even during periods when other indicators pointed to economic weakness.
“GDP numbers suggested that growth remained strong,” the authors write, despite the economy facing a series of shocks, including the global financial crisis, India’s domestic banking crisis known as the “twin balance sheet” problem, the 2016 demonetization shock, the implementation of the Goods and Services Tax, and the economic disruptions caused by the COVID-19 pandemic.
The researchers identified two major methodological issues contributing to the misestimation of GDP. The first pertains to the measurement of India’s informal sector, which constitutes a significant portion of economic activity. In the national accounts framework introduced in 2015, the performance of the informal sector was often estimated using data from the formal corporate sector.
This approach assumes that trends in the organized sector reflect those in the vast informal economy. However, the authors argue that this assumption faltered after 2015, when several policy and economic shocks disproportionately affected small businesses and informal enterprises. Demonetization in 2016 disrupted cash-based economic activities, while the nationwide rollout of the Goods and Services Tax created compliance challenges for smaller firms. The COVID-19 pandemic further exacerbated the difficulties faced by informal workers.
Because formal sector firms demonstrated greater resilience during these shocks, using them as proxies for the informal sector likely overstated overall economic performance, according to the paper.
The second issue relates to price deflators, which are used to convert nominal economic activity into real growth figures. In many sectors, these deflators were heavily influenced by commodity prices, particularly oil. When commodity prices declined sharply, these deflators also fell, mechanically inflating measured real growth even if actual output did not increase proportionately. This methodological choice, the authors argue, led to an overstatement of real GDP growth during periods of declining commodity prices.
After adjusting for these methodological issues, the authors conclude that India’s economic trajectory appears different from what official statistics suggest. Instead of a steady high growth rate over two decades, the adjusted data indicate that India experienced a clear boom between 2005 and 2011, followed by a slowdown beginning in the early 2010s.
Despite the slower growth rates indicated by the revised estimates, the authors emphasize that India’s economic performance remains robust by global standards. Growth after 2011, although slower than official numbers suggest, continues to be strong compared to many emerging and advanced economies.
The paper also underscores the importance of accurate national income statistics for effective economic policymaking. GDP data guide decisions made by governments, businesses, and central banks regarding fiscal policy, investment, and interest rates. If growth is overstated, policymakers may underestimate economic weaknesses and fail to respond adequately. Conversely, underestimating growth could lead to overly cautious policies.
As the authors note, “If the GDP numbers suggest that growth is strong when it is actually weak, businesses are liable to misinvest, households to overspend, and the central bank to maintain an excessively tight monetary policy.”
The debate over India’s GDP data has intensified periodically since the methodology change in 2015, with economists both within and outside India questioning various aspects of the statistical framework. The authors acknowledge that recent methodological revisions and consultations by Indian statistical authorities aim to address some of the concerns raised in the study. However, they caution that it will take time to determine whether the new revisions fully resolve the measurement challenges.
The broader lesson, they argue, is that measuring economic activity in a large, complex, and partly informal economy like India’s is inherently challenging. Nonetheless, improving these measurements is essential—not only for academic analysis but also for effective economic policymaking. As the authors conclude, getting the numbers right is crucial, as inaccurate data can distort perceptions of economic performance and lead to misguided policy choices.
According to The American Bazaar, the findings of this study could have significant implications for how India’s economic performance is perceived both domestically and internationally.