India's 20-year GDP estimate error: New evidence (English) 2026

26-3.India’s 20 Years of GDPMisestimation: New Evidence. Abhishek Anand, Josh Felman, and Arvind Subramanian.March 2026. ABSTRACT. This working paper presents new evidence suggesting that India misestimatedits annual growth rate during the past two decades. Growth during the boomyears between 2005 and 2011 may have been underestimated by about 1–1½percentage points on average; and subsequent growth between 2012 and 2023may have been overestimated by about 1½-2 percentage points. Once theseadjustments are made, it appears that the Indian economy did not grow ata stable rate over the past two decades but rather boomed during the early Abhishek Anandis aVisiting Fellow at the Josh Felmanis a principalat JH Consulting. Arvind Subramanianisa senior fellow at the JEL Codes:E01, O47, C82, O11, O53.Keywords:GDP mismeasurement; national accounts; informal sector; price Authors’ note:Versions of this paper were presented at Cornell University, HarvardUniversity, the Indira Gandhi Institute of Development Research, the Peterson Institutefor International Economics, and the International Monetary Fund. We are grateful toparticipants at these seminars, as well as to Sajjid Chinoy, R. Nagraj, Dev Patel, Justin Unless we understand how the numbers are put together, and what they mean, we run the risk ofseeing problems where there are none, of missing urgent and addressable needs, of being outraged — Angus Deaton, The Great Escape At the end of February 2026, following an extensive consultative process, the Indian government introduceda revised GDP.1One purpose was to update the weights of the various goods and services, a step that was long For much of the past decade, experts had raised questions about the methodology used to estimate GDP.2These doubts spread to a wider public in 2016, when the demonetization and withdrawal of 86 percent of thecountry’s currency apparently caused real GDP growth to accelerate to an eye‐popping annual rate of 8.3 percent.They resurfaced in 2019, when a credit crunch caused by a crisis in India’s nonbank financial institutions apparently This paper revisits these debates, in order to: (a) reassess the trajectory of the world’s fifth‐largest economyduring a critical period in its development and (b) provide a benchmark for evaluating the 2026 changes to GDP One might ask why GDP methodology is important. After all, it hardly matters whether growth is, say, 7.2percent or 7.4 percent. If, however, the misestimation is large enough to convey a false sense of how well theeconomy is doing, serious problems arise. If the GDP numbers suggest that growth is strong when it is actually This paper examines the GDP methodology introduced in January 2015, initially to the post 2011–12 numbersand later to the historical series. It explains why doubts about the GDP numbers arose, identifies the key method‐ The paper finds that after the 2015 methodology was introduced, correlations between GDP and key indicatorsthat span sectors—exports, credit, taxes, electricity consumption, sales, and the index of industrial production— Why did this misestimation occur? The January 2015 methodology had two main problems: inappropriatedata sources and inappropriate deflators.4A large share of Gross Value Added (GVA) emanating from the informal To be clear, the main problem with the 2015 series was not the absence of double deflation, as is often al‐leged. In fact, this was a relatively minor problem. The real problem was the use of inappropriate deflators and These methodological problems caused growth over the past two decades to be misestimated in both directions(table 1). Broadly, they caused growth for 2005–11 to be underestimated by about 1–1½ percentage points in thebackcasting exercise; and caused subsequent growth to be overestimated by about 1½–2 percentage points.5We We find that the post‐2011 overestimation occurred because the triple shocks of demonetization, introductionof the Goods and Services Tax (GST), and the Covid‐19 pandemic caused the performance of the informal sector The paper is structured as follows. The next section identifies the misestimation problem by comparing GDPestimates against other macro indicators, within India and across countries. The following section determines the 3There were many other weaknesses, some of which are detailed below.Particularly problematic was the introduction of a newdatabase for the corporate sector: MCA‐21.4Over all but the shortest periods, GDP and GVA are essentially synonymous, as they show the same numbers for economic growth.For technical reasons, in some places GVA is preferred to GDP as a measure of economic activity, as GDP includes indirect taxes andsubsidies, which can swing widely depending on when the subsidies are actually paid. sources of the misestimation.6The next section discusses the backcasting exercise, in which the 2015 methodologywas used to re‐estimate growth during India’s boom years of the mid‐2000s. The penultim