A recent working paper claims that India overstated its annual growth by up to two percentage points from 2012 to 2023, while growth between 2005 and 2011 was underestimated by about one to 1.5 percentage points.
India’s Growth Miscalculated: Study Finds Overestimation After 2012 and Undercounting Before 2011
The study, released in March 2026 by the Peterson Institute for International Economics and written by Abhishek Anand, Josh Felman, and Arvind Subramanian, presents this reassessment as a reference point for evaluating the government’s revised GDP method introduced in February 2026.
The authors, who hold positions across academic and policy institutions, estimate that actual growth from 2011 to 2023 averaged only 4 to 4.5%, rather than the official 6%.
Moving further, the paper highlights a clear mismatch between official GDP data and real economic trends.
For example, indicators like bank credit, exports, electricity use, and tax revenue grew strongly between 2005 and 2011 but declined sharply from 2012 onward, even though GDP figures continued to show steady growth.
As a result, this gap has distorted perceptions of living standards.
Study Finds India’s GDP and Consumption Overstated, Points to Methodological Flaws
The authors estimate that by 2025, real GDP levels were overstated by about 22% and real consumption by around 31%, implying that actual living conditions are weaker than reported.
The study attributes these errors to two main methodological problems.
First, it explains that data from formal firms was used to estimate growth in the informal sector.
However, small and cash-based businesses were more severely affected after 2015 due to demonetisation, GST, and the COVID-19 pandemic, making such assumptions misleading.
Consequently, treating informal sector growth as equal to that of large firms inflated overall growth figures.
Second, the paper identifies flaws in inflation measurement tools, or deflators, used to calculate real growth.
Instead of reflecting final consumer prices, these tools were tied to input costs like oil.
When oil prices dropped, costs fell and profits rose, but this was incorrectly recorded as higher output.
After correcting for these issues, estimated growth drops from 5.9% to roughly 4.0–4.4%.
As the paper states, “The net result of the deflator and data problems was that real GDP growth was overestimated for the post-2011 period.”
It also notes that although the 2015 methodology aimed to align with global standards, weak data and poor deflators reduced its reliability.
Subramanian further stated that growth was overstated after 2011–12 and understated before that period.
This misjudgment had policy effects, including misleading signals about economic strength and lowering pressure for reforms.
Finally, the revised lower growth rate helps explain weak investment, low capacity use, and slow job growth, showing the economy was not as strong as reported.
