India’s economic growth may have been significantly misestimated over the past two decades, with official statistics understating the boom years of the mid-2000s and overstating the expansion in the years that followed, according to a new study by economists Abhishek Anand, Josh Felman and Arvind Subramanian.
The research argues that India’s national accounts methodology introduced in 2015 created distortions that changed the narrative of the world’s fifth-largest economy’s growth trajectory. Instead of a steady expansion of around 6-7 per cent annually, the study argued the economy has likely experienced a strong surge in the mid-2000s, followed by a pronounced slowdown after the global financial crisis in 2008 and a series of domestic shocks.
According to the working paper, growth between 2005 and 2011 may have been underestimated by around 1-1.5 percentage points a year, while growth between 2012 and 2023 may have been overestimated by roughly 1.5-2 percentage points (see chart).
After adjusting for these biases, the authors estimate that the economy has expanded by around 4-4.5 per cent on an average during 2011-2023 rather than the roughly 6 per cent as suggested by the official figures.
In other words, the NDA government led by Narendra Modi, which is in its third term, was in power for the majority of the period when the economy appeared to have grown slower than estimated, while Manmohan Singh led UPA ruled when the economy was understood to have expanded quicker than estimates suggested.
Subramanian, who was the former chief economic adviser of India between 2014 and 2018, is a senior fellow at the Peterson Institute of International Economics. Anand is a visiting fellow at the Madras Institute of Development Studies, while Felman is a principal at JH Consulting.
Formal vs informal
The study attributes the statistical distortions primarily to two methodological issues embedded in the revised national accounts framework introduced in 2015, when Subramanian was CEA, and the Modi government had just spent a year in office in its first term.
First, the methodology relied heavily on data from the organised or formal sector to estimate activity in the informal sector. Since reliable real-time data on unorganised enterprises was scarce, the Central Statistical Office (CSO) used indicators from the formal corporate sector as a proxy to extrapolate output growth in informal segments of the economy.
This approach assumed that the informal sector, which accounts for 44 per cent of the gross value added (GVA), moved broadly in tandem with the organised sector. However, the paper argues that the assumptions broke down after a series of shocks that disproportionately affected small and unorganised enterprises. The demonetisation of high-value currency notes in 2016, the rollout of Goods and Services Tax in 2017 and the disruption caused by the Covid-19 pandemic all hit the informal economy more severely than the large corporate firms.
Evidence cited in the study suggests that while revenues in the formal sector grew by about 10 per cent a year between 2015 and 2023, the informal sector expanded by only about 6.8 per cent annually. By assuming both sectors grew at similar rates, official estimates likely overstated output from the informal economy and, therefore, the overall pace of growth.
Price deflators
The second source of mis-measurement relates to the deflators used to convert nominal growth output into real growth. In several sectors, price deflators were based on the wholesale price index (WPI), which is heavily influenced by commodity (essentially oil) prices.
But input prices moved very differently from consumer prices over the past decade. Between 2011 and September 2025, WPI averaged 2.2 percentage points lower than consumer price inflation (CPI), meaning that the deflators used in GDP calculations understated price increases in the economy.
When deflators are too low, real GDP growth appears artificially higher. The paper argues that this mechanism systematically inflated estimates of real output post 2011.
Backcasting
The paper also revisits the controversial “backcasting” exercise that attempted to revise historical growth numbers using the new methodology. When India changed the base year of its national accounts to 2011-12 and introduced the new estimation framework in 2015, the revised series initially covered only the years after 2011-12. This created a break in the statistical series, making it difficult to compare growth in earlier years.
To address this, the government carried out a backcasting exercise to recalibrate growth for the period 2005-11 using the new methodology. The revised numbers were released in November 2018.
Oddly, the figures were announced by the government’s policy think tank, NITI Aayog, rather than by the official statistical authority, the ministry of statistics and programme implementation.
The release also came amid controversy because a government-appointed committee, led by Sudipto Mundle, under the National Statistical Commission had produced an alternative backcast earlier the same year.
The committee’s estimates suggested that India experienced a much stronger boom during 2005-11, consistent with a wide range of macroeconomic indicators such as credit growth, investment, exports and corporate sales. In contrast, the official backcast significantly lowered growth during the boom years, producing a much smoother growth profile across the past two decades.
The paper argues that the official backcasting exercise may have understated the strength of the mid-2000s expansion by around 1.5 percentage points a year. It also notes that the revisions had knock-on effects on other macroeconomic aggregates, particularly consumption, where the recalculated figures show significantly weaker growth during the boom period than suggested by independent survey data.
Policy consequences
The authors concluded that the misreading of the country’s economic growth has two important consequences: complicating the task of calibrating policies to the actual condition of the economy, and second, an attenuation of the urgency of reforms.
“After all, why should one change the policy framework when it is already producing world-beating growth?” the authors observed.
However, the study also emphasises that the findings do not imply India’s economic performance has been weak in absolute terms. Rather, the results indicate that the country has experienced greater cyclical swings than commonly believed. The authors say the new methodological revisions ushered in by the government in February 2026 aim to address the challenges identified in the working paper.