Government Explains New GDP Estimates, Double Deflation and Revisions in Q1 FY2026-27 Data

The Ministry has issued a detailed clarification on India’s latest Gross Domestic Product (GDP) estimates, addressing questions over the revised GDP series, negative manufacturing deflators, differences between GDP inflation and CPI/WPI inflation, the gap between nominal and real growth, and statistical discrepancies in the first quarter of 2026-27.

The clarification comes after the government released the updated annual and quarterly GDP estimates with 2022-23 as the base year on August 31, 2026. The revised series incorporates the new Output Producer Price Index (PPI), Banking Services Price Index (BkSPI) and updated information from administrative data sources.

The Ministry said the additional explanations have been provided to help stakeholders understand the impact of the new methodology, particularly the adoption of double deflation in selected sectors.

Why has the government issued additional clarifications?

The latest GDP series has raised questions over several technical issues, including why manufacturing recorded a negative implicit GVA deflator even when input and output prices were rising, why the previous year’s nominal GDP estimate changed, and why GDP inflation differed significantly from CPI and WPI inflation.

The government has now explained these issues through a detailed question-and-answer document.

Key issues addressed include:

Negative manufacturing deflator does not mean prices fell

One of the major questions concerns the -1.5% implicit GVA deflator for manufacturing in Q1 FY2026-27.

The Ministry stressed that a negative GVA deflator should not be interpreted as a decline in manufacturing prices.

Under the double-deflation approach, output and intermediate consumption are separately adjusted for price changes. Real GVA is then calculated by subtracting real intermediate consumption from real output.

Therefore, if input prices rise faster than output prices, nominal GVA can grow more slowly than real GVA. This can result in a negative implicit GVA deflator.

The Ministry provided an illustration:

In this example, nominal GVA increases by 12%, while real GVA rises by 17.5%. The resulting implicit GVA deflator becomes negative, even though output prices themselves have increased.

In Q1 FY2026-27, manufacturing’s nominal GVA growth was 7.7%, compared with real GVA growth of 9.2%, resulting in an implicit GVA deflator of around -1.5%.

The government said activities such as textiles and cotton ginning, basic metals, and rubber and plastic products experienced situations where input-price growth was higher than output-price growth.

Agriculture followed a different methodology

Agriculture’s quarterly GVA is compiled differently. The constant-price estimate is first calculated using production estimates, after which the current-price estimate is derived using the relevant Producer Price Index.

During Q1 FY2026-27, the output PPI for the Agriculture, Forestry and Fishing group increased by approximately 5%. As agricultural nominal GVA is strongly influenced by output prices, its implied inflation remained positive at 3.9%.

This explains why manufacturing and agriculture showed different implicit GVA deflator movements despite both being part of the broader production economy.

Why was last year’s GDP revised from ₹86.05 lakh crore?

Another major issue concerns the revision of Q1 FY2025-26 current-price GDP from ₹86.05 lakh crore under the old series to approximately ₹80 lakh crore under the latest series.

The Ministry rejected the suggestion that the previous year’s GDP was deliberately reduced to make the latest growth rate appear higher.

The government explained that the figure has changed through successive revisions:

The original estimate was released on August 29, 2025, under the then-prevailing 2011-12 base-year series.

In February 2026, the government introduced the new GDP series with 2022-23 as the base year. Base-year revisions involve comprehensive changes to historical estimates, including updated data sources, coverage and methodologies.

Subsequently, further data and indicators became available, leading to additional revisions. The incorporation of the new IIP and PPI data resulted in the latest estimate of around ₹80 lakh crore.

The Ministry stressed that the old ₹86.05 lakh crore figure cannot be directly compared with the current Q1 FY2026-27 estimate because the two belong to different GDP series.

For calculating growth, the relevant comparison is between estimates from the same and latest comparable series.

Why GDP inflation differs from CPI and WPI

The Ministry has also addressed the apparent mismatch between a 2.5% implied GDP inflation rate, 3.9% consumer inflation and WPI inflation of more than 9%.

According to the government, the three indicators measure different aspects of the economy.

The GDP deflator covers a much wider economic spectrum. It includes government expenditure, investment, exports and a broad range of services such as banking, information technology and real estate.

Consequently, high commodity or wholesale inflation can coexist with relatively low GDP deflator inflation if other parts of the economy, particularly services, experience lower price growth.

The Ministry said the implicit GDP deflator is a derived measure reflecting the impact of more than 300 individual price deflators used across different items and sectors.

Double deflation does not directly affect PFCE

The government also clarified that double deflation is not directly used to calculate Private Final Consumption Expenditure (PFCE).

Double deflation is primarily a production-side methodology used to calculate real GVA by separately deflating gross output and intermediate consumption.

PFCE measures final expenditure by households and therefore does not involve intermediate consumption in the same way.

For goods, constant-price PFCE estimates are compiled using relevant volume indicators, while current-price estimates are derived using appropriate consumer price indices.

For services such as education, healthcare, restaurants and accommodation, relevant output indicators and price indices are used.

Mining shows a sharp nominal-real growth difference

The Mining and Quarrying sector presents another important example of why nominal and real growth can diverge substantially.

Mining’s real GVA growth in Q1 FY2026-27 was -2.4%, broadly reflecting weak IIP performance during April and May, despite some recovery in June.

At the same time, mining prices rose sharply.

The sharp increase in prices of crude petroleum, natural gas and metal ores pushed nominal mining GVA growth to 22.3%, even though real GVA contracted.

This, the government said, explains the apparent gap between nominal and real estimates.

Statistical discrepancy may change with future revisions

The Ministry has also cautioned against interpreting the statistical discrepancy in Q1 FY2026-27 as evidence that GDP is either understated or overstated.

GDP is estimated through both production and expenditure approaches. Differences between these approaches appear as a statistical discrepancy.

As more comprehensive data become available, estimates on both sides can be revised, causing the discrepancy to change.

The government said it would therefore be incorrect to assume that the current discrepancy will automatically result in a specific upward revision of GDP.

The final direction and magnitude of revisions will depend on changes in the underlying production- and expenditure-side estimates.

According to the Ministry, discrepancies become very small or zero in the final estimates, as seen in FY2022-23 and FY2023-24.

Government’s larger message on GDP methodology

The latest clarification is aimed at explaining that GDP estimates are not based on a single price index or a single data source. The new 2022-23 base-year series incorporates updated datasets, new price indices and methodological improvements.

The government has particularly sought to clarify that unusual movements in individual indicators—such as a negative manufacturing deflator or a large difference between nominal and real mining growth—do not necessarily indicate an inconsistency in the GDP estimates.

Instead, these movements can arise from the interaction of production volumes, input prices, output prices, sectoral weights and different statistical methodologies.

The Ministry said the latest explanations are intended to provide greater transparency and help researchers, economists, policymakers and other stakeholders better understand the revised GDP estimates and the implications of the new methodology.