Former Finance Secretary Subhash Chandra Garg and Professor Dr Gaurav Vallabh, a member of the Prime Minister’s Economic Advisory Council, clashed over India’s latest GDP figures on an India Today TV programme hosted by Marya Shakil. While Garg questioned the extent of the revisions in the new GDP series, Vallabh defended them, attributing the changes to expanded economic coverage and updated methodology.
Garg, who has faced criticism for estimating nominal GDP growth at 2.5% by using the earlier figure for the previous year’s first-quarter GDP, said his primary concern was neither the deflator nor the change in the base year. Instead, he questioned how the government’s current-price GDP figure had been revised from Rs 86 lakh crore to Rs 80 lakh crore.
“If it brings down from 86 lakh crores to 80 lakh crores... it owes an explanation,” Garg said, arguing that such a substantial revision deserved closer examination.
He said the change amounted to a reduction of nearly Rs 6 lakh crore and also highlighted what he described as an even bigger revision to figures from earlier years.
Garg said the current-price GDP for 2023-24 had, in contrast, been revised upward by around Rs 6-6.5 lakh crore in the latest estimates. According to him, revisions of such magnitude were significant enough for the government to provide a detailed explanation.
“This kind of unprecedented revision I haven't seen in my life at all,” Garg said.
He also challenged Vallabh and the government to examine historical data to determine whether current-price GDP had ever previously undergone a revision of such a large proportion.
‘Base-year change alters economic coverage’
Vallabh disagreed with Garg’s interpretation, arguing that revisions following a change in the GDP base year involve far more than adjustments to prices.
He explained that the updated methodology incorporated fresh surveys, GST data, improved company information, government records and changes in the coverage of economic activity.
Vallabh used the example of factories being included or excluded from GDP calculations as the available data and understanding of economic activity change.
His argument was that the Rs 86 lakh crore and Rs 80 lakh crore figures could not be directly compared because they were produced under different statistical frameworks.
“With the change in base year, there is a difference in the coverage of economic activity,” Vallabh said. He also pointed out that GDP figures go through multiple rounds of revisions before becoming final, making it too early to draw firm conclusions from the initial estimate.
Garg disputes ‘numerator-denominator’ argument
Garg maintained that Vallabh’s explanation did not address his specific objection because his argument concerned current-price GDP rather than the subsequent calculation of real GDP using a deflator.
“There is no question of denominator and numerator here in the current prices,” Garg said.
He argued that his 2.6% growth calculation was based on the government’s earlier current-price GDP figure and did not depend on changing the inflation or deflator assumptions used in the official calculation.
Vallabh countered that Garg’s approach effectively assumed that the coverage of economic activity had remained unchanged despite the revision of the base year.
According to Vallabh, calculating growth at 2.6% or suggesting that real growth was zero without taking the methodological changes into account amounted to an inaccurate reading of the revised data.
Debate shifts to jobs
The discussion then turned towards employment, with Vallabh citing official indicators to argue that the economy remained on a strong footing. He pointed to 7.1% growth in private consumption, 11.9% growth in gross fixed capital formation and 12% growth in real exports, along with a reported fall in unemployment.
Garg, however, said the employment figures required more detailed scrutiny. He argued that a significant portion of the rise in employment came from unpaid work in family businesses and agricultural activity, which he said did not necessarily indicate the creation of high-quality jobs.
He also highlighted concerns surrounding unemployment among educated young people and those who were outside the labour force.
“There is glass full, half full, and there is glass half empty as well,” Garg said, describing the employment picture as neither entirely positive nor entirely negative.
Vallabh acknowledged that improving job quality continued to be a challenge but maintained that the broader economic indicators reflected continued growth.
The debate ultimately centred on whether the substantial revision of GDP figures following the base-year change should be viewed as a normal outcome of improved data and methodology, or whether the scale of the changes warrants greater transparency, explanation and scrutiny.
