Word of the Week is GDP: How India’s economic growth figures stirred a big debate

This week, GDP became a buzzword for one and all. It turned into front-page headlines; fodder for prime-time debates on television and even a water-cooler conversation for office workers.

But why?

On August 31, the Ministry of Statistics and Programme Implementation (MoSPI), the Government of India’s statistical agency, released data about the country’s gross domestic product (GDP), stating that it had grown 7.8 per cent in Q1-2027, compared with growth of 6.9 per cent in Q1-2026.

Everyone seemed to be overjoyed as the growth numbers beat everyone’s estimates, the Reserve Bank of India (RBI) included. Prime Minister Narendra Modi called this “exemplary growth” and a “herculean feat.” Finance Minister Sitharaman saw this as proof of continuous government reforms and agile economic management.

However, some disagreed with the numbers. Congress leader Jairam Ramesh called the numbers “statistical gymnastics”, while former Finance Secretary Subhash Chandra Garg argued that actual GDP growth was much lower.

This has resulted in a full-blown war of words with India’s top economic minds sparring over the numbers. This is why we have chosen GDP (Gross Domestic Product) to be our Word of the Week.

What does GDP mean?

GDP is the most common measure for the size of an economy. It measures the total value of goods and services produced by that economy during a specific time period, typically a year or a quarter. It can be calculated using three different formulas that look at expenditures, output, or inputs.

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This concept was created by Simon Kuznets, a Russian-born US economist, who was trying to make sense of the Great Depression and its impact on the economy. According to a report by the World Economic Forum, Kuznets’ invention was a stroke of genius. It summarised in one number the economic strength of the entire nation and gave policymakers hints on to how to improve it.

During the remainder of the 1930s, other economists helped standardize and popularize it, and by the time the Bretton Woods conference was held in 1944, GDP was confirmed as the main tool for measuring economies around the world.

What do India’s latest GDP figures reveal?

On August 31, the Ministry of Statistics and Programme Implementation (MoSPI) published data revealing that India’s GDP grew 7.8 per cent in April-June, much faster than what most economists expected and significantly higher than the Reserve Bank of India’s forecast of seven per cent.

These GDP numbers seem significant as they reflected the country’s resilience despite concerns that the Iran war and resulting global economic uncertainty could weigh on growth.

India’s first quarter GDP data that came out earlier this week, widely beat forecasts, giving many a reason to smile. Representational image/Reuters

Prime Minister Narendra Modi hailed these figures as a “herculean feat”, attributing the performance to the collective strength and resilience of the Indian economy despite oil price shocks, supply-chain disruptions and global uncertainties.

“India’s exemplary GDP growth of 7.8 per cent during Q1 of FY 2026-27 is a herculean feat,” PM Modi said in a post on X, adding that the growth came despite oil price shocks and supply-chain issues.

In a selfie-style video, PM Modi also congratulated the country for the GDP growth, noting that Indians should contribute to building a self-reliant economy.

“Foreign trips, if you are going for leisure, you should not go. If you are getting married abroad, you should not do so. And if it is not necessary, you should not buy gold either,” Modi said.

He said greater emphasis on swadeshi and self-reliance would help India realise its ambition of becoming a developed country by the centenary of independence. “The more we emphasise swadeshi, the more we emphasise self-reliance, I have firm faith that when it is 100 years of independence, we will present a developed India to our young generation,” he said.

The PM also took a jibe at critics, adding, “Doomsayers were doomed and India bloomed…yet again!”

How have these GDP numbers snowballed into a row?

However, while many started popping champagne to celebrate the news, India’s former Finance and Economic Affairs Secretary Subhash Chandra Garg raised questions about these GDP numbers.

Garg said the real GDP figure for the first quarter of the previous year was originally released under the old GDP series, while the corresponding figure under the new series is now being used as the base for calculating Q1 2026-27 growth. “I think this is a serious question which we should really examine. The growth 7.8 per cent in this quarter on the face of it looks very good,” Garg said.

Subhash Garg, then Finance Secretary, with Finance Minister Nirmala Sitharaman at a pre-Budget consultation meeting in New Delhi. File image/PTI

He added that the change in the base makes a direct comparison difficult and that the GDP numbers should also be examined at current prices. “Therefore, comparing it with that base should be taken with a little bit of a pinch of salt. The better sort of analysis is done in terms of the GDP growth in current prices,” Garg added.

In an interview with NDTV, Garg claimed that growth at current prices would have been only 2.6 per cent if the government had not revised down last year’s GDP. “See, 7.8 per cent looks impressive on the face of it, but we should get into the reality of it. Last year’s GDP growth in the first quarter was also 7.8 per cent, which is claimed for the current year as well. Last year’s GDP has been revised down to 6.9 per cent. So, if you revise last year’s GDP down from what was claimed last year, this year goes up. But that doesn’t explain the whole of it…” Garg said in the interview.

These remarks soon went viral, with the Congress saying it must understand that “PR can polish the picture” of GDP but not the economy itself.

Soon enough, former RBI Governor Raghuram Rajan too waded into the row, questioning why, if the growth indeed was so rapid, India was not creating more jobs or attracting more foreign direct investment.

This prompted the government to hit back. Commerce and Industry Minister Piyush Goyal defended India’s numbers, and attacked those questioning them. “I see on TV some of the opposition leaders, even possibly a former finance secretary or a former RBI (Reserve Bank of India) governor, both of whom could not complete their tenure in India… They don’t even know [that they should] compare apples with apples. They are trying to misguide the people of India, comparing growth rate [based on an] old series with a new series where the base year itself has changed.”

The government also issued a six-point rebuttal without naming Garg, asserting that its methods and the numbers released on Monday were correct.

Additionally, the government’s view was supported by the World Bank’s executive director for the country, Neelkanth Mishra, who said the new GDP series “cleaned up the data and also significantly improved the methodology”, enhancing the credibility of the estimates.

Will this matter be put to bed? It remains unclear. For now, it would be significant to see how the economy continues to fare in this year.