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India’s GDP base revision corrects statistical distortions and offers a clearer view of underlying growth: methodological changes, particularly better deflators, have reduced volatility in real output, eliminated the GDP‑GVA wedge, and clarified consumption-investment dynamics. Nominal GDP is now about 4% smaller, driven by downward revisions to services. Services’ share is 2pp lower, industry share 0.6pp higher, and agriculture 1.4pp higher. The downward revision in base is primarily due to FY23 – the old series over-estimated post-Covid recovery in the informal economy. But growth in GFCF and PFCE in FY26 is stronger in the new series. We maintain 7.5% for FY27.
New base: GDP size shrinks, but a clearer picture of underlying economy
After the base revision, India’s nominal GDP is now 4% smaller; some had expected it to rise 8-10%. This cut is entirely due to a downward revision in services, primarily in Trade, hotels, transport and communication. Finance is estimated to be larger than in the old series due to expansion of coverage of private NBFCs, while PADS (Public Adm, Defence) has been revised lower (adjustment to pension payments). The share of services in GDP falls 2%, industry rises 0.6pp to 28%, and Agriculture rises 1.4pp to 19%.
Methodological changes resolve statistical issues like deflator, growth stabler
As expected, the use of the double-deflator reduces volatility in GVA at constant prices (primarily due to services). The GVA-gap in current prices between the two series is much lower, implying the deflator was the challenge (in both services and industry). Lower volatility in govt consumption nearly eliminates the GDP-GVA wedge – earlier the cause of much consternation. New series GFCF growth is notably higher in 1HFY26: was lower in old series.
We retain our above consensus FY27 growth forecast at 7.5%
The 4pp reduction in nominal GDP makes the centre’s FY31 debt-to-GDP target tougher but has minimal (if not a slightly positive) impact on bond demand-supply. The estimated ~7pp cut in real output is mostly for FY23, reflecting slower revival in the informal economy post-Covid. But we expect their growth to be faster now. The end to growth downgrades we anticipated in Feb-2025 has now moved to strong upgrades. In FY27, negligible fiscal consolidation and macroprudential and monetary easing imply better growth.
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