India’s second quarter growth reaches 8.2%, but IMF’s ‘C’ certificate dampens the spirit
Most news papers in India including ‘The Hindu’ have put the news about the 8.2% GDP growth in the second quarter of 2025 –2026 (June ’25 to September ’26) as their front page headline, but for discerning readers and global financial agencies, this news will have to be taken with a pinch of salt. The IMF’s award of ‘C’ grade to GDP figures, and ‘B’ grade to CPI numbers, steals the thunder out of the Indian government’s loud rejoicing.
Real GDP is Nominal GDP minus inflation during the period. The Government of India’s Statistical office does not lack the expertise to collect good quality data from across the country, but the doubt about the credibility of the published sets in due to three factors.
First, the base year for calculation continues to be 2011-12. Common sense says that its too old a period to be adopted for GDP computation. IMF and many more global institutions have been asking for abandoning this old, and obsolete base year for quite some time, but the Indian government has not heeded it, although it has come to light that in the first few months of 2026, the government will announce a change in the base year.
The second factor that weighed in the mind of the IMF evaluators is the failure of the data collectors to quantify the contribution of the informal sector that too adds to the GDP but doesn’t find mention in the final calculation sheet.
Thirdly, for calculating Consumer Price Index (CPI), a fairly big basket of commodities are included. Items in this basket are given different weights for calculation. IMF experts feel that India’s statistical office gives unduly high weightage to the many food items in the calculation basket. Such a stance deprived India of the coveted ‘A’ rating for the CPI figures.
Should we pat ourselves in the back for this high 8.2% GDP growth rate, especially because the figure in the last year was a meagre 5.6%? Many economists are not convinced. Since Real GDP is the figure, we obtain by deducting inflation rate from the Nominal GDP, we can easily calculate that the Nominal GDP growth didn’t reach double digit figures. Inflation rate was a nominal 0.24%. When added to the Real GDP growth rate, the Nominal GDP growth figure falls short of a double-digit number. Thus, for the experts, India grew, but not that fast as being claimed. This is bad news for India.
There is hope that India’s Statistical Office will be able to release more credible figures in the future. The inclusion of GST collection as a yardstick of measuring Nominal GDP growth figures will enhance the accuracy of the calculation. The other factor that will help quantify the informal economy’s role is the fast growing adoption digital payments both in the urban and rural areas of the country. Small traders, service providers, and cottage industries now accept UPI mode for their transactions. Such transactions are tiny in quantity, but enormous in volume. Adopting AI tools, the size of the informal economy can be estimated with more accuracy. So, India and its global watchers can expect more credible growth figures in future.