Is India really growing at 7.8%
The state of the economy is measured by the total income generated within it in any period. You know this better as GDP.
Now, income can only be measured in today's prices — or current prices. But that does not really tell us how much our purchasing power has increased. Inflation eats into it.
So, to get at real income growth, GDP in current prices has to be 'deflated' using a proxy for inflation known as the GDP deflator.
This deflated number is what you usually hear as the GDP growth rate.
In the latest quarter — April–June 2026 — India's GDP grew by 10.3% in current prices, and 7.8% in real, inflation-adjusted terms.
That means the real inflation felt in the economy in the June quarter — the GDP deflator — was just 2.3%.
How could that be possible when retail inflation in the same period was 3.9% and wholesale inflation was a whopping 9.4%?
If we assume that two-thirds of the economy is affected by retail inflation, and the rest by wholesale inflation, then effective inflation in the economy would work out to 5.7%.
Gap between GDP deflator and Effective Inflation has shot up
The gap between the GDP deflator and effective inflation — which has mostly stayed within 1.2 percentage points on either side, and never exceeded 1.9 percentage points — is now a massive 3.4 percentage points.
What happens if we rework real GDP using the effective inflation rate of 5.7% instead?
GDP growth drops sharply to just 4.4%!
Now, the obvious counter to this would be that the GDP deflator is not just a weighted average of retail and wholesale inflation — it has several other components, such as the trade deflator, and the imputed prices of goods and services that are not bought and sold.
But those components have always been present in GDP calculations, and whatever impact they have on the deflator is already captured in the gap between the GDP deflator and effective inflation.
So, let me yield to those objections as generously as possible by taking the highest deflator-inflation gap in the past three years — 1.9 percentage points — to calculate this quarter's deflator.
Effective inflation = 5.7%
Highest gap = 1.9%
Adjusted deflator = 3.8%
That would yield real GDP growth of just 6.3%.
You could increase it to 6.5% if you want, but it would still be far short of the published figure.
The 7.8% growth figure is simply the result of statistical gymnastics. more
Now, income can only be measured in today's prices — or current prices. But that does not really tell us how much our purchasing power has increased. Inflation eats into it.
So, to get at real income growth, GDP in current prices has to be 'deflated' using a proxy for inflation known as the GDP deflator.
This deflated number is what you usually hear as the GDP growth rate.
In the latest quarter — April–June 2026 — India's GDP grew by 10.3% in current prices, and 7.8% in real, inflation-adjusted terms.
That means the real inflation felt in the economy in the June quarter — the GDP deflator — was just 2.3%.
How could that be possible when retail inflation in the same period was 3.9% and wholesale inflation was a whopping 9.4%?
If we assume that two-thirds of the economy is affected by retail inflation, and the rest by wholesale inflation, then effective inflation in the economy would work out to 5.7%.
Gap between GDP deflator and Effective Inflation has shot up
The gap between the GDP deflator and effective inflation — which has mostly stayed within 1.2 percentage points on either side, and never exceeded 1.9 percentage points — is now a massive 3.4 percentage points.
What happens if we rework real GDP using the effective inflation rate of 5.7% instead?
GDP growth drops sharply to just 4.4%!
Now, the obvious counter to this would be that the GDP deflator is not just a weighted average of retail and wholesale inflation — it has several other components, such as the trade deflator, and the imputed prices of goods and services that are not bought and sold.
But those components have always been present in GDP calculations, and whatever impact they have on the deflator is already captured in the gap between the GDP deflator and effective inflation.
So, let me yield to those objections as generously as possible by taking the highest deflator-inflation gap in the past three years — 1.9 percentage points — to calculate this quarter's deflator.
Effective inflation = 5.7%
Highest gap = 1.9%
Adjusted deflator = 3.8%
That would yield real GDP growth of just 6.3%.
You could increase it to 6.5% if you want, but it would still be far short of the published figure.
The 7.8% growth figure is simply the result of statistical gymnastics. more
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Why are you so upset? Even if it is 6.3%, it is good. Instead of wasting time in writing so much computations, simply say you are a member of INDI group. more
2 h ago
Hello Scholar , Have you educated from IIT Or IIM ? Because only Higher educated peoples are having lot of Doubts in their mind as thinking & observation power get diminished in Books. If You want Go to Any railway station & watch the trains. Previously there was only 4 AC Coaches was attached per train while Sleepers were 12 - 15. Today half of the train carries AC Coaches , & still there is huge waiting list . what it Indicates ? Poverty is in Mind . You cant Improve it. more
7 h ago
More than GDP , Capacity increase in manufacturing areas vs sales and new emploment opportunities created in this period matters most for a stable economy. As we see population growth raising in parallel and more
Sep 04
It has become a habit for 'social activists' to pull down the achievements of the Government with logically untenable arguments. Wonder what the motives of such people are. When elections are won, it is the mandate of the people and when they lose it is all the fault of the voting machine. The same logic is applied by these activists and their coterie. When statistics about Government's performance is given negatively, that data is immediately believed and when it doesn't fit these people's narrative, then we holler "this data is cooked up; I won't believe it" more
Sep 02
Lovely Ms Ruchika. You should have been the Finance Minister of the country. You would have made India push to 90% instead of the paltry 7.8%. I also applaud all the members who have agreed and appreciated the comment by Ms Maheswari. more
Sep 02
