'Vietnam revised GDP by 25% in 2019': Economist explains why last year's estimate changed

Economist Sriram Balasubramanian on Monday rejected the argument that India's 7.8% GDP growth in the April-June quarter was overstated. He called the comparison used to arrive at a much lower growth figure "frankly absurd".

"If you really take all the thematic issues, number one starting off with Dr Garg's assertion that the GDP numbers (2.8%) by comparing the two years, I think that comparison is frankly absurd," Balasubramanian said while speaking to Business Today Group Editor Siddharth Zarabi.

At the same time, he said the roughly 7% revision in GDP was a legitimate issue for economists to examine. "There is an argument related to why there is a revision of about 7%. That's a legitimate argument for people to understand why there's a revision."

On August 31, the MoSPI reported that India's real GDP grew 7.8% in April-June 2026. The numbers came in stronger than expected despite the energy shock and geopolitical disruptions.

However, under the new series, with 2022-23 as the base year, the estimate for April-June 2025 was revised to around Rs 80.3 lakh crore. Under the old GDP series, which used 2011-12 as the base year, this figure was estimated at around Rs 86.1 lakh crore. Nominal GDP for April-June 2026 under the new series came out at Rs 88.3 lakh crore.

Former Finance Secretary Subhash Garg questioned the sharp downward revision in the April-June 2025 estimate. He argued that there appeared to be a pattern of revising previous numbers downward, which, in his view, could mechanically make the current growth rate look higher. He sought to know what had caused the reduction in the estimate.

Balasubramanian said such revisions can happen when countries rebase their national accounts as they move towards a new equilibrium using updated data. "For instance, countries like Vietnam, for example, in 2019 had a revision of almost 25% percent on their GDP to the positive," he said.

The economist said a large part of the revision in India's GDP data came from the trade, repair services, hotels, and restaurants segment.

"If you really look at the data of the NAS (National Accounts Statistics) 2026, you find that a large section of this revision is on a sub-component called trade, repairs, and hotels and restaurants, which is dominating the entire revision," he said.

The overall revision, according to him, would be much smaller if this segment were excluded. "Basically, in simpler terms, if you take out this section, the revision between the previous numbers and the current numbers are fairly limited."

Balasubramanian said this component had also been a major contributor during the 2011-12 revision. He said trade involves imports and exports, which can show significant variation over time. Many businesses in these sectors are also private-sector or private-sector-aligned and can undergo structural changes.

"So compared to 2011-12 to now, which is almost a decade plus, this subsector could have gone through a variety of changes structurally," he said, adding that historical precedent was another factor to consider. "For example, other countries might have different types of economic structures, and their components might vary during the rebasing. Whereas for us, this is one of the components that has been affected significantly."

Balasubramanian also addressed criticism that India's informal sector may have been overestimated. He said economist Arvind Subramanian and others have argued that the overestimation was about 22%. But he said a comparison of the NAS 2026 and NAS 2025 data showed a smaller difference.

"If you go back to the data, the NAS 2026 and NAS 2025 and do a comparison, you find that the estimation is about 3.7 percent in 2023-24, and 3.34 percent in 2022-23," he said. "Again, the differences are much less than what some of the critics talk about."

BT Exclusive: Why manufacturing deflator turned negative: MoSPI Secretary explains 'double deflation' effect

Why The Double Deflator Matters

Balasubramanian also defended the use of the double-deflator approach in the new GDP series. He explained that the method takes into account price changes in both inputs and outputs when calculating value addition.

"For example, I buy a chocolate for a hundred rupees. The chocolate has a lot of inputs, like for example sugar, for example cocoa, for example a variety of other products that are given as inputs," he said.

The economist explained that the price rise in the inputs and the price rise in the final product both play a role in calculating manufacturing value addition. India had followed a single-deflator system for a long period, while the IMF had recommended a double-deflator approach, he said.

Balasubramanian also questioned why some critics who had wanted the double-deflator approach in 2019-20 now wanted to move away from it. "A lot of the critics who wanted the double deflator approach in 2019-20 and suddenly want to move away from that approach for a variety of reasons, which are unknown," he said.

In Case You Missed It: Why Did India’s GDP Fall From ₹86L Cr To ₹80L Cr? | MoSPI Secy Dr. Saurabh Garg Explains

'Numbers Are Indicating The Right Direction'

Balasubramanian said the new GDP series had addressed several data issues that existed before the base revision. "My sense is from a sort of statistical lens, in terms of data, I think there were issues with the data prior to the base revision," he said. "MoSPI has made a concerted effort to deal with a lot of these issues in the updated versions."

He said there could be an academic debate over whether India should use a single or double deflator. "But to purely sort of point the finger of either manipulation or questioning the integrity of the authorities, I think, is highly ill-informed," he said. "My view is that the trend line, along with other macro indicators, seems to be indicating the right direction."