December 18th 2025.
The latest report by the National Statistics Office for the July-September quarter of 2025 has sparked a lively discussion about the true state of India's economic data. On the surface, things seem to be looking up. India has achieved a real GDP growth of 8.2%, the highest in six quarters and well above the IMF's forecast of 6.6%. This comes after strong performances in the previous quarters, with 7.4% growth in January-March and 7.8% in April-June. The growth is being attributed to the progress in agriculture, manufacturing, services, and the increase in consumption due to the implementation of GST. The impact of US tariffs on Indian exports is being downplayed, as it is believed to have a minimal effect on the overall growth figures.
However, a closer look at these impressive numbers reveals a structural puzzle. The nominal GDP growth, which measures the economy's expansion before adjusting for inflation, has been consistently declining. It was at 10.7% earlier in 2025, then dropped to 8.8%, and now stands at 8.7% in the latest quarter. This shrinking gap between nominal and real GDP suggests an unusually low GDP deflator of only 0.5%. This means that the real GDP is being inflated, making the growth appear stronger than it actually is. This phenomenon has been dubbed "Schrödinger's Economics", a term borrowed from Nobel laureate physicist Erwin Schrödinger. The comparison was made by Matt O'Brien, a columnist for the Washington Post, who used it to describe the contradictory economic claims made by the Trump administration back in 2018. In this context, it refers to a situation where conflicting indicators coexist, with one showing improvement and the other showing deterioration.
The Indian economy seems to be in a similar situation, with real GDP showing a surge while nominal GDP is slowing down. Employment rates are lagging behind the growth, and corporate revenues and tax collections are also showing signs of weakness. This has immediate fiscal consequences, as a lower nominal GDP affects all fiscal calculations, including deficits, expenditure ratios, and tax projections. The government's own projections have been affected by this volatility, with the 2024-25 budget projecting a growth of 10.5% but delivering only 9.7%. The 2025-26 projection of 10.1% is also expected to fall short. It's important to note that growth rates mean different things for different economies. For example, a 1% increase in GDP in the US adds over $3051 billion, while in China it adds $192.3 billion, and in India, it only adds $41.9 billion. This highlights the need to bridge the gap between India's headline growth and its per capita income, as the latter is still lower than 135 other countries. Without addressing this issue, the growth figures will remain a mere statistic and will not reflect the overall welfare of the population.
What is concerning is that the IMF has given India a C-grade for its national accounts' statistics, while awarding a B-grade for prices, external statistics, government finances, and monetary and financial data. The C-grade indicates that although data exists, it suffers from deficiencies such as using an outdated 2011-12 base year to calculate GDP and gross value added. Another major issue is India's reliance on the Wholesale Price Index as the GDP deflator, while the global standard is the Producer Price Index. Moreover, India uses a single deflation method, which applies one deflator to both inputs and outputs, whereas global best practices recommend double deflation for more accurate measurement of real value-added, especially during periods of price volatility. Additionally, India also delays in publishing consolidated central and state fiscal data.
One of the biggest blind spots in India's economic data is the informal sector, which makes up almost half of the economy. The current methods rely on extrapolating trends from the formal sector, which becomes unreliable during major disruptions such as demonetisation, GST rollout, or the pandemic, when the informal sector's activities deviate significantly from the formal sector's trends. Furthermore, there are institutional delays that have been going on for a long time. For instance, the population census, which was due in 2021, has been postponed, affecting per capita income, poverty estimates, and labor market assessments. The data on household consumption expenditure is also outdated, forcing the CPI to use a consumption basket from 2011-12. These shortcomings hamper effective surveillance of the economy. A strong statistical foundation is crucial not only for accurate measurement but also for credible policymaking, investor confidence, and inclusive growth.
The writer, an economist and columnist from Odisha, emphasizes the importance of a robust statistical system for the country's development. As the leading daily English newspaper in Odisha, Orissa POST is committed to providing accurate and reliable information to its readers.
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