7.8% or 2.6%? India’s GDP Growth Controversy Explained [Subhash Garg vs Government]
7.8% or 2.6%? Here’s what the GDP confusion is actually about
Two GDP growth numbers have been floating around for the last few days. 7.8%. And 2.6%.
One is the government’s official GDP growth number (7.8%) for the April-June quarter. The other comes from Subhash Garg (2.6%), India’s former Finance Secretary.
Both can’t be true, right? Let me explain how I have decluttered this matter for myself. I’ll explain it one step at a time for you.
Step 1: The base year changed
In February 2026, India shifted its GDP base year from 2011-12 to 2022-23.
| Old Base Year | New Base Year |
| 2011-12 | 2022-23 |
This happens every decade or so.
A base year is simply the reference point used to price everything in the economy (wheat, mobiles, services, everything).
Update the base year, and the price structure used to calculate GDP changes with it.
A quick example:
- Say in 2011-12, a kg of rice cost ₹20.
- In 2022-23, the same kg costs ₹45.
If India produced 100 kg of rice in both years, output hasn’t changed. But when we value it using the abobe two prices, its GDP will show as below:
- 2011-12 prices: GDP shows ₹2,000 (100 x 20 = 2000)
- 2022-23 prices: GDP shows ₹4,500 (100 x 45 = 4500).
Same 100 kg of rice, but there are two very different GDP numbers.
Why does it happen? Just because the pricing base changed.
That’s exactly what happened when India moved its GDP base year from 2011-12 to 2022-23.
But when we calculate the GDP of a country, it is not only rice; we have to value of all reference goods and services produced in the country.
Till now, it is simple, right? So now, let’s move to step #2
Step 2: What changed for Q1 FY26
Here’s the same quarter, Q1 FY26, measured in two different ways:
| Description | Old base (2011-12) | New base (2022-23) | Inflator | Remarks |
|---|---|---|---|---|
| Real GDP (net of inflation) | ₹47.89 L cr | ₹75.46 L cr | 1.57x | This was expected |
| Nominal GDP (current price) | ₹86.05 L cr (reference price is as of Q1 FY26) | ₹80.00 L cr (reference price is as of Q1 FY26) | 0.93x | How did the value fall? Is this a red flag? |
So you can see, the real GDP jumping from ₹47.89 to ₹75.46 lakh crore is a price-tag change.
Here is what is being done: the same output is being multiplied by a different price (a higher one). Why a higher price? Because generally the price of goods and services rises with time, and in this case we are talking about a ~10-year period (2011 to 2022)
But the first red flag we can see in the Nominal GDP calculation.
When Real GDP grew by 1.57x between 2011 and 2022, the nominal GDP actually fell.
For for sure, the nominal GDP cannot be inflated by 1.57x. But ideally it should be very close to one, right? Why? Because the base year for nominal GDP calculation is the same. But it shows up as 0.93x
Is this an anomaly compared to the last base-year revision data?
Yes, 0.93x is an anomaly compared to past trends.
Historically, India’s base-year revisions (like 2004-05 → 2011-12) moved nominal GDP by low single digits. It has often been revised up, not down.
So, a ~7% drop (1 – 0.07 = 0.93) in one revision is unusually large and outside that historical pattern. This is exactly why it deserves a clear explanation.
Probably this is the reason why Mr. Subhash Garg is asking to take ₹86 lakh crore value as the base year number and no ₹80 lakh crore.
The nominal figure shouldn’t move much just because the base year changed.
This fall may have come from a genuine data overhaul. Probably there have been new GST filings, MCA21 company data, and revised informal-sector coverage, etc.
I agree, there can be an explanation for this downward shift in the nominal GDP number. But as of now, the government has not explained this point with clarity.
Step 3: The government’s calculation – and why 7.8% isn’t as clean as it looks
For Q1 FY27, the government compared new-series numbers against new-series numbers. They have used the same method for both the years:
| Description | Q1 FY26 (new base) | Q1 FY27 | GDP Growth |
|---|---|---|---|
| Nominal GDP | ₹80.00 L cr | ₹88.27 L cr | (88.27-80)/80 = 10.3% |
| Real GDP | ₹75.46 L cr | ₹81.36 L cr | (81.36-75.46)/75.46 = 7.8% |
On the surface, this looks like a fair, apples-to-apples comparison.
But here’s the catch.
Real GDP is not measured directly. It’s derived.
Real GDP = Nominal GDP ÷ Deflator.
The gap between nominal growth and real growth is the deflator. And that gap should roughly track actual inflation.
Let’s check what possible deflator number has been used to arrive at the Nominal GDP figure.
Deflator ≈ Nominal GDP growth − Real GDP growth = 10.3% − 7.8% = 2.3%
This means the government’s calculation assumes prices rose only 2.3% between Q1 FY26 and Q1 FY27.
Now compare that with what actually happened to prices in that same quarter.
- CPI inflation averaged close to 3.9%
- WPI inflation averaged close to 9.3% (driven by fuel, metals, and manufactured goods. Both numbers are well above 2.3%)
Now, with this as our reference number, what should be the deflator value?
We know that the GDP deflator isn’t purely CPI or WPI. It is more of a blended measure across all goods and services in the economy. So the deflator should logically fall somewhere between CPI (3.9%) and WPI (9.3%). My guess is that the deflator should be roughly in the 5-6% range (also historically).
| Deflator | Minimum | Maximum |
| For Q1 FY27 Real GDP Calculation | 3.9% | 9.2% |
But the deflator that we got is 2.3%.
A deflator this low, sitting far under real-world inflation, has one direct effect: it inflates real GDP growth.
There’s a second issue stacked on top.
The ₹80.00 lakh crore nominal base for Q1 FY26 used in this calculation is the same figure flagged in Step 2. It is that value that fell 7% from ₹86.05 lakh crore, with no clear sector-wise explanation.
So 7.8% isn’t a clean, independently verified number.
Step 4: Is this just a Q1 story, or bigger?
Worth checking one more thing before we conclude.
MoSPI’s own official dashboard (mospi.gov.in) lets us compare quarterly growth rates under both base years side by side. You can also check the pdf here.
Here’s Q1 and Q2 of FY26:
| Description | Old base (2011-12) | New base (2022-23) | Change |
|---|---|---|---|
| Q1 FY26 | 7.8% | 6.8% | −1.0 pt |
| Q2 FY26 | 8.2% | 8.3% | +0.1 pt |
Look at the asymmetry.
- Q1 FY26 was cut by a full percentage point.
- Q2 FY26 barely moved.
This is an important data point because Q1 FY26 is exactly the quarter now sitting as the denominator for this year’s headline 7.8% number. A base year revision that disproportionately lowers the one quarter that later becomes the comparison base is worth noticing.
In fairness to MoSPI, this isn’t an unexplained black box sitting untouched. A base-year revision, by design, restates the entire back-series — which is exactly why this dashboard exists, showing every quarter under both bases.
So, what’s missing isn’t the recalculation. What’s missing is a sector-by-sector note explaining why Q1 specifically absorbed a bigger cut than Q2.
What’s My Final Understanding of this issue?
Subhash Garg’s 2.6% number, calculated by mixing old and new series, may not be correct. But as I said in step 2, a 0.93x decline in the nominal GDP of Q1 FY26 is not a common phenomenon.
“Historically, India’s base-year revisions (like 2004-05 → 2011-12) moved nominal GDP by low single digits. It has often been revised up, not down.”
This is why, probably, Mr. Subhash Garg is suggesting that the use of ₹86 L crore as a base-year number is justified.
But anyways, even if MOSPI is dismissing Mr. Garg’s number, it cannot dismiss his question.
Two things in this GDP release don’t add up cleanly:
- A 7% fall in nominal GDP with no sector-wise explanation, and
- A deflator of 2.3% sitting well below both CPI and WPI.
Either one alone could be explained away. Both together, unexplained, is what’s fueling this entire controversy.
So here’s what I’ve told myself:
I’ll take 7.8% as the number to track, because it’s the correct, methodologically sound comparison. But I won’t take it as the full picture. The onus is now on MoSPI to publish the sector-wise bridge. Until that comes, healthy skepticism about the magnitude of this number is fair.
