New Delhi : Former Finance Secretary Subhash Chandra Garg and Economic Advisory Council to the Prime Minister member Gaurav Vallabh clashed over India’s latest GDP figures in an India Today TV discussion. Garg, who has faced criticism for calculating nominal GDP growth at 2.5% using the earlier figure for the previous year’s first-quarter GDP, said the central issue was not the deflator or the change in the base year, but how the government’s current-price GDP figure had fallen from Rs 86 lakh crore to Rs 80 lakh crore.
He said the revision represented a reduction of around Rs 6 lakh crore, and pointed to what he described as an even larger revision in the previous years. According to Garg, the current-price GDP for 2023-24 had been revised upward by around Rs 6-6.5 lakh crore in the latest revision. He argued that such changes were significant enough to warrant a detailed explanation from the government.
He challenged Vallabh and the government to examine historical data to establish whether current-price GDP had ever been revised by such a large percentage. Vallabh rejected Garg’s interpretation, saying the change in GDP estimates after a base-year revision was not limited to changes in prices. He said the revised methodology incorporated new surveys, GST records, better company data, government records and changes in the coverage of economic activity.
“Because with the change in base year, there is a difference in the coverage of economic activity,” Vallabh said. He also argued that GDP estimates undergo several rounds of revisions before reaching final figures, making it premature to draw definitive conclusions from the first estimate. Garg said Vallabh’s explanation did not address his specific concern because he was discussing current-price GDP, rather than the subsequent calculation of real GDP using a deflator.
He maintained that his 2.6% calculation was based on the government’s earlier current-price GDP figure and did not involve changing the inflation or deflator assumptions used in the official calculation. Vallabh, however, said Garg’s calculation effectively assumed that the coverage of economic activity had remained unchanged despite the change in the base year. He said arriving at a growth rate of 2.6% or suggesting zero real growth without accounting for the methodological changes amounted to an incorrect interpretation of the data.
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