India’s latest GDP figures have generated quite a buzz. According to official data, the country’s Real GDP grew by 7.8% in the first quarter of FY 2025-26 (April to June 2025). At first glance, this looks like a very strong performance, reinforcing India’s image as the fastest-growing major economy in the world. But if we look beyond the headline number, some troubling questions arise about how these growth figures are being calculated and presented.
Real GDP growth is not a standalone figure. It is derived using a simple formula:
Real GDP Growth = Nominal GDP Growth – Inflation.
Nominal GDP reflects the total value of goods and services produced in the economy at current market prices. Inflation is then subtracted to get the “real” figure, which supposedly shows the growth after adjusting for rising prices.
Now here is where things get interesting. In Q1 FY 2025-26, India’s nominal GDP growth was recorded at just 8.8%. That is one of the lowest nominal growth rates seen since the Covid pandemic. Subtract the reported inflation of 1%, and we get the headline real GDP growth of 7.8%.
On paper, this looks fine. But does it truly reflect the reality that ordinary households and businesses are experiencing? Many would argue that it does not.
Think about it: only 1% inflation? That is the number the official data is working with. But anyone paying school fees, buying groceries, renewing health or motor insurance, or even just paying their electricity bill knows that costs are rising far more than 1%. Vegetables, milk, cereals, and pulses have all seen sharp price increases.
Rents in urban areas are climbing. Private schools continue to hike their fees well above inflation. Insurance premiums have risen by double digits in many cases. Even small, everyday expenses like transport and dining out feel heavier on the pocket than a year ago.
So where is this 1% inflation figure coming from? That is the key question. Over the past few years, there have been multiple reports and debates about how India calculates its inflation index, the Consumer Price Index (CPI).
Critics argue that the basket of goods and services used to measure inflation is outdated and does not reflect the real consumption patterns of modern Indian households. Some items carry too much weight, while others that have become essential in recent years barely figure in the index.
If inflation is underestimated, then real GDP growth automatically appears higher. For instance, if actual inflation was closer to 4% or 5%, then real GDP growth for the quarter would not be 7.8%, but closer to 3.8% or 4.8%. That would paint a very different picture of the economy.
This is why focusing only on real GDP growth can be misleading. The headline number makes for good politics and strong headlines, but it hides the underlying weakness in nominal growth and the questionable inflation figure that props it up. In fact, 8.8% nominal growth is extremely modest for a developing economy like India, especially when compared to the double-digit nominal growth rates seen in the years before Covid.
The key takeaway is that growth and inflation data need to be looked at together, not in isolation. A high real GDP growth number is meaningless if it is achieved by artificially suppressing the inflation component. What matters to ordinary people is not how inflation is calculated on spreadsheets, but how much more they are paying for the same basket of goods and services compared to last year.
At the end of the day, macroeconomic statistics should reflect lived reality. When there is a growing disconnect between official numbers and household experiences, public trust in economic data starts to erode. And that is dangerous, because it undermines both policymaking and accountability.
So the next time you see a glowing GDP growth headline, remember to ask: what was the nominal GDP growth, and what inflation number was used? The answers to these two questions tell you much more about the health of the economy than the headline figure alone.
