India’s GDP Paradox: Strong Growth Figures Amid a Data Credibility Crisis 

Despite India reporting surprisingly strong GDP growth of 8.2% in the second quarter of 2025, the International Monetary Fund has maintained its ‘C’ grade evaluation of the country’s national account statistics, highlighting a critical paradox where impressive growth figures coexist with significant methodological shortcomings that undermine their credibility, including an outdated 2011-12 base year, problematic measurement of the vast informal sector through organized sector proxies, and the use of inappropriate price deflators, all of which have sparked a decade-long debate about potential growth overestimation and create challenges for accurate policymaking and international investment decisions, even as India prepares to address these concerns with a new GDP series rebased to 2022-23 in early 2026.

India’s GDP Paradox: Strong Growth Figures Amid a Data Credibility Crisis 

Recent reports that India’s GDP growth surged to 8.2% in July-September 2025 present a puzzling economic narrative. While this figure suggests a booming economy, it comes just as the International Monetary Fund (IMF) reaffirmed a ‘C’ grade for India’s national accounts statistics – the second-lowest rating in its assessment system, indicating significant data shortcomings that “somewhat hamper surveillance” of the economic landscape . 

This contrast between impressive growth numbers and institutional skepticism about the data behind them reveals a complex story about how economic progress is measured, reported, and interpreted in one of the world’s fastest-growing major economies. 

What the IMF’s ‘C’ Grade Really Means 

The IMF’s assessment, part of its annual Article IV consultations with member countries, evaluates the quality and reliability of economic data. A ‘C’ grade indicates that India’s national accounts statistics have “some shortcomings that somewhat hamper surveillance” of the economy . 

This evaluation reflects concerns that policymakers, investors, and international institutions might not be working with the most accurate picture of India’s economic health. While India received an overall ‘B’ grade for its general data systems, the national accounts specifically – which include critical metrics like GDP and Gross Value Added – were deemed less reliable . 

Key Methodological Concerns Identified by the IMF 

The IMF’s critique centers on several structural and methodological issues in how India calculates its economic performance: 

• Outdated base year: India’s GDP series still uses 2011-12 as the base year, despite significant structural changes in the economy over the past decade . The IMF recommends rebasing every five years to accurately capture economic shifts. 

• Problematic informal sector measurement: Approximately 45% of India’s GDP comes from the unorganized sector, yet estimation methods may not adequately capture its performance . Experts note that using organized sector performance as a proxy for the unorganized sector can lead to significant miscalculations when the two sectors are moving in different directions . 

• Reliance on WPI instead of PPI: India uses the Wholesale Price Index (WPI) rather than Producer Price Indices for deflating many GDP components, which can distort real growth estimates when sectoral price dynamics vary significantly . 

• Discrepancies in GDP calculations: There are sizeable inconsistencies between production-side and expenditure-side GDP calculations, suggesting gaps in coverage or methodology . 

• Lack of seasonal adjustment: India’s quarterly national accounts are not seasonally adjusted, making it harder to interpret short-term economic trends meaningfully . 

Table: IMF’s Key Concerns About India’s National Accounts Data 

Historical Context: A Decade-Long Debate 

The current skepticism about India’s GDP data isn’t new. It dates back to 2015 when India introduced a new GDP series with 2011-12 as the base year. This revision brought methodological changes that initially boosted reported growth rates – the growth rate for 2013-14 jumped from 4.8% in the old series to 6.2% in the new series . 

What raised eyebrows among economists was that these higher growth estimates didn’t align with other economic indicators such as bank credit growth, industrial capacity utilization, or fixed investment growth . This disconnect marked the beginning of the ongoing debate about the accuracy of India’s official GDP figures. 

The MCA-21 Database Controversy 

A significant methodological change in the 2011-12 series was the introduction of the MCA-21 database from the Ministry of Corporate Affairs to estimate the private corporate sector’s contribution to GDP . This sector accounts for approximately one-third of India’s GDP . 

The database came under scrutiny when a National Sample Survey Office verification found that about 45% of companies in the MCA-21 list for the services sector “were found to be out-of-survey/casualty” – meaning they didn’t exist, weren’t operating, or were engaged in unrelated activities . 

Former Chief Economic Advisor Arvind Subramanian added to the debate in 2019 with research suggesting India’s annual GDP growth between 2011-12 and 2016-17 might have been overestimated by 2.5 percentage points per year . 

The Informal Sector: The Heart of the Measurement Challenge 

The core issue in India’s GDP measurement debate revolves around how the country accounts for its vast informal economy. According to economist Arun Kumar, India’s actual GDP might be only about 48% of the official $3.8 trillion figure, suggesting significant overestination . 

The problem stems from methodology: India uses organized sector performance as a proxy for estimating the unorganized sector’s contribution to GDP. This approach works when both sectors move in tandem but fails dramatically when they diverge – as happened after demonetization in 2016, the implementation of GST in 2017, and the COVID-19 pandemic . 

Former Chief Statistician Pronab Sen explains the quarterly estimation challenge: “We make a lot of assumptions, and we simply don’t have quarterly data for most things. When you don’t have the data, you have to go by assumptions” . This reliance on assumptions rather than hard data introduces significant uncertainty into growth estimates. 

Recent Growth Numbers in Perspective 

Against this backdrop of methodological concerns, India’s recent GDP figures present a puzzling picture. The 8.2% growth in Q2 FY2025 appears robust, but economists note that low inflation has played a significant role in boosting the real GDP figure . 

The nominal GDP growth – which isn’t adjusted for inflation – was notably lower at 8.7% in the same quarter . This discrepancy between real and nominal growth rates underscores how inflation measurement affects the final growth reading. 

The IMF’s own projections suggest a moderating growth trend, with expectations of 6.6% growth in FY2025/26 and 6.2% in FY2026/27 . These figures, while still strong by global standards, are more tempered than the recent quarterly surges. 

The Path Forward: Rebasing and Reforms 

Recognizing these statistical challenges, India is preparing to release a new GDP series with 2022-23 as the base year in early 2026 . This rebasing exercise aims to capture India’s changing economic structure more accurately. 

The government also plans to introduce: 

• A revised Consumer Price Index based on the 2023-24 Household Consumption Expenditure Survey 

• A new Index of Industrial Production using 2022-23 as the base year 

However, experts caution that simply changing the base year without addressing methodological concerns may not resolve the fundamental issues. What’s needed is a comprehensive review of how economic activity is measured, particularly in the informal sector . 

The IMF has recommended specific reforms to improve data quality: 

• Expand informal sector coverage through frequent household and enterprise surveys 

• Develop producer price indices to replace the wholesale price index for deflation 

• Provide seasonally adjusted quarterly GDP data 

• Reconcile production-side and expenditure-side GDP calculations 

Beyond the Numbers: Why Reliable Data Matters 

The debate over India’s GDP methodology isn’t just an academic exercise. Reliable economic data serves as the foundation for effective policymaking, guiding decisions on interest rates, fiscal policy, and public spending . 

For international investors and multilateral institutions, data credibility influences investment decisions and country risk assessments. As India positions itself as a global growth engine and alternative manufacturing hub, transparency in economic measurement becomes increasingly important. 

As the IMF notes in its assessment, improving the “quality, availability, and timeliness of macroeconomic and financial statistics” would significantly support better policy decisions in India . 

Conclusion: A Critical Juncture for Indian Statistics 

India stands at a statistical crossroads. The planned overhaul of its GDP series in 2026 represents an opportunity to address longstanding concerns and restore confidence in its economic measurements. 

While recent growth figures of 8.2% generate headlines, the deeper story lies in the methodological underpinnings of these numbers. As Pronab Sen noted, “At the moment the GDP figure we regularly produce is no better and no worse than what it was 10 years ago” – highlighting that the system’s limitations are longstanding, not new. 

For India to achieve its ambition of becoming a high-income economy by 2047 – which requires sustaining 7.8% average annual growth over the next two decades – having accurate, transparent economic data isn’t just desirable; it’s essential for tracking progress and guiding the policy decisions that will determine whether this ambitious goal remains within reach. 

The coming year, with its planned statistical revisions, will reveal whether India can align its impressive growth narrative with equally robust measurement systems that earn the confidence of both domestic stakeholders and international institutions.