India’s economic growth results have reignited a debate over the country’s GDP estimates, and now the new national accounts series has led to a significant revision in nominal GDP in previous quarters. SBI Research has now explained the revision and said that the changes are largely due to the introduction of a new GDP base year, new methodology, and better data, and not an unusual change.
The discussion comes against the backdrop of India showing 7.8% real GDP growth in Q1 FY27. The figure has attracted much attention because the latest estimates are different than the ones in previous GDP series.
In its latest Ecowrap report, SBI Research looked at the history of GDP revisions and changes introduced under the new national accounts series. Since FY09, India has seen 239 GDP revisions across 70 quarters. Of these, 134 of them have been upward and 105 downward. SBI Research said this historical pattern does not mean that GDP revisions always move in one direction.
Why was GDP revised by nearly Rs 42 Lakh Crore?
One of the main points of discussion has been the downward revision of nominal GDP under the new series. SBI Research noted that between Q1 FY23 and Q2 FY26, nominal GDP was revised downward by around Rs 41.8 lakh crore.
At the same time, however, real GDP was revised upward by about Rs 372 lakh crore.
SBI Research said that these figures shouldn’t be viewed separately. Nominal GDP and real GDP are calculated using different price and volume considerations, so changes in the methodology and price structure have a significant impact on their respective estimates.
The report stated that focusing only on the nominal GDP reduction may not give a good picture of the changes that have come with the new series.
The services sector saw a major revision.
The revisions were also uneven across different sectors of the economy. SBI Research found that nearly Rs 39 lakh crore of the downward revision in Gross Value Added (GVA) was concentrated in sectors such as trade, hotels, transport and communication.
But this decline was partly offset by an upward revision of Rs 13.6 lakh crore in financial, insurance, real estate and business services.
SBI Research attributed these changes to the use of new and more complete datasets. The new national accounts include additional information about informal and unincorporated businesses as well as corporate and administrative data.
This broader data coverage can lead to changes in historical estimates, as previously available information may not have fully captured activity across different parts of the economy.
GDP Deflator Adds Another Layer To Debate
Another important aspect of the GDP debate is the GDP deflator, which measures price changes across the economy. Some analysts have questioned the divergent nature of the GDP deflator and more widely followed inflation measures like the Consumer Price Index (CPI) and Wholesale Price Index (WPI).
SBI Research said its estimates generally tracked the official sectoral deflators. But the report also acknowledged that the methodology and price measures used in national accounts are still an important part of the ongoing discussion around GDP calculations.
The GDP deflator is particularly important because GDP growth can be significantly influenced by the way nominal economic activity is converted into real, inflation-adjusted growth.
Investment Indicators Remain Supportive
SBI Research noted that although the methodology and revisions were contested, the high-frequency indicators show that economic activity is still strong.
The report also identified investment trends as a positive factor. According to SBI Research, incremental private sector investment has averaged Rs 3.5 lakh crore annually since FY23, with around Rs 3.3 lakh crore during the six years through FY19.
That investment trend, in conjunction with other economic indicators, was cited as evidence of broad economic growth.
What does the Revision mean for India’s growth story?
The latest GDP revisions have undoubtedly raised questions about how India's economic performance should be interpreted. But SBI Research’s analysis suggests that the large changes are linked to methodological improvements, the rebasing of national accounts and the availability of newer datasets.
The Rs 41.8 lakh crore downward revision in nominal GDP also needs to be taken into account, as does the Rs 372 lakh crore upward revision in real GDP, as well as sector-wise changes in GVA.
The debate over India's 7.8% Q1 FY27 GDP growth is likely to continue as economists and analysts analyze the new series and compare it with previous estimates. For now, SBI Research's analysis is comprehensive in terms of why the numbers were revised and argues that India's national accounts methodologies are evolving.
But the new GDP series should also provide a richer picture of economic activity by incorporating new data sources and updated methods. Economists will have a better understanding of the consistency of the revised estimates and the underlying growth of India once more quarterly data on GDP becomes available in the future.
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