The Invisible Asset: What India's GDP Row Is Really About

During my years in the Ministry of Finance, particularly through the turbulence of 2012–13, I came to appreciate an asset that rarely enters public debate. It does not appear in the Budget or on any balance sheet, and yet it moves interest rates, capital flows and exchange rates more than most instruments a Finance Ministry actually controls. 

That asset is credibility.

Governments borrow money through bonds. They govern through trust.

I find myself returning to this thought as I watch the argument now underway over India's 7.8% GDP growth for the first quarter of 2026-27. Former Finance Secretary Subhash Garg says the comparison is skewed by a lower base; MoSPI says it's invalid because it mixes an old series with a new one. Both can be right on their narrow point, and still miss what actually worries me: not this quarter's number, but what a decade of official data handling has done to the public's willingness to believe any number at all.

Start with what predates this row entirely.

Systematix's research has traced a decade-long pattern: the Employment-Unemployment Survey lapsed after 2011-12, and its replacement, the Periodic Labour Force Survey, sat on its first results for nearly two years before releasing them once an election had passed. Consumption data went dark for the same stretch — the last full household expenditure survey before 2022-23 dated back to 2011-12. 

And the one survey that actually tracks India's unorganised enterprises, where a majority of the workforce sits, went nearly eight years without being repeated. I do not read this as one agency's oversight. Spread across a decade and across three different data systems, it looks more like an institutional habit of looking away from the numbers most likely to complicate the story.

The consequence has now surfaced in the numbers themselves. 

The old GDP series, built on formal-sector proxies extended year after year without informal-sector data to check them against, appears to have overstated growth systematically — unincorporated enterprises account for something like 60%of value added in the sectors where they operate, and their absence from measurement quietly tilted the picture toward the organised economy for the better part of a decade. 

When the new 2022-23 base finally incorporated informal-sector survey data, nominal GDP for 2022-23 to 2025-26 was revised down by roughly ₹42 trillion, about ₹10 trillion a year.

If the earlier years are eventually recast on the same base, the full-decade correction could run higher still. On a seven-year basis, nominal GDP growth now looks structurally close to 9%, the weakest reading since the early 1970s outside the pandemic, implying real growth nearer 4-5% than the 7-8% we have grown used to hearing.

MoSPI's stock answer to critics has been that the old and new series are simply not comparable — apples and oranges, in the official phrase.

As Systematix's research points out, this defence cuts both ways: an agency that pleads incomparability to deflect scrutiny of the past decade cannot then invoke the very same incomparability as proof that this quarter's number stands on firmer ground. Either the two baskets can be weighed against each other, in which case the comparison Garg is making deserves a real answer, or they cannot, in which case the government's claim of a stronger growth story cannot rest on the difference between them.

The April-June quarter of 2026-27 supplies its own smaller version of the same problem. The implied GDP deflator for the quarter is 2.5%, against CPI inflation near 4% and wholesale price inflation above 9%—and the reported manufacturing deflator is actually negative, at minus 1.5%, while manufacturing wholesale prices rose by more than 7%.

Pronab Sen, India's first Chief Statistician, has been careful to say this does not amount to manipulation, and I take him at his word. But a deflator this far out of line with every other price signal, undisclosed in its construction, is exactly the kind of thing that keeps a trust deficit alive even after the immediate political noise dies down.

None of this would matter as much as it does if the public felt none of it. They do. RBI's own urban confidence survey shows the net response on employment at minus 22% as of July, by some readings worse than in 2013, when India was grouped among the "Fragile Five." 

Real wage growth for already employed graduates has run at barely 0.1% a year since 2017, and the Economic Survey has separately found real worker earnings down 6.4% between 2017-18 and 2023-24. People are not litigating a deflator over dinner. They are asking whether the number matches their payslip, and a decade of survey gaps and one-way revisions has left them with every reason to doubt the answer either way.

Surjit Bhalla's sharp critique comes at the problem from a different angle. Even granting the headline figure, he argues, India remains in a standstill of ambition — a comfortable 6% growth with no push toward the manufacturing investment the country needs, against independent estimates that closing the job gap would require something closer to 8.5% sustained over a decade. I recognise part of this from 2012-14 as well: Growth stalls not only when opportunity is absent, but when institutions cannot convert opportunity into investment — which is a credibility problem too, just a quieter one than a GDP row.

What I would draw from the 2012-13 crisis is this. The rating agencies mattered less, in the end, than what a downgrade might have set in motion — capital flight feeding rupee weakness feeding further capital flight, a belief manufacturing the outcome it feared; what restored room to manoeuvre was not a single announcement but a sustained pattern, visible over several quarters, of consistency and follow-through. MoSPI cannot undo a decade of survey gaps by rebutting one quarter's critics. It can publish the full Sources and Methods document, including a genuine back-cast series linking the old and new bases, and it can commit in advance to how future revisions will be explained, rather than explaining them only once a public controversy flares up.

Credibility is not a public relations problem to be managed after the fact. It is a policy variable, built in advance and spent in a single bad news cycle if neglected. Markets, in my experience, do not ask whether a government is perfect. They ask whether it is credible. India's growth may well be real. Whether it is believed to be real is now the more urgent question — and after a decade like the one behind us, that belief will have to be rebuilt one transparent quarter at a time.