The Indian government reported faster-than-expected GDP growth of 8.2% for the September quarter. It came as a surprise to many economists who were expecting a slowdown based on the recent high-frequency indicators such as consumer goods sales and durable goods production, as well as two-wheeler sales. At the same time, The International Monetary Fund expressed doubts about the Indian government's GDP data. 

The IMF has recently expressed doubts about Prime Minister Narendra Modi's BJP government's GDP data. It has particularly questioned the government's statistical methodologies, inflation measurement, and the estimates of the informal economy used in reporting the country's gross domestic product. Professor Arun Kumar of Jawaharlal Nehru University believes the IMF's concerns are valid. He thinks the real size of India's economy is only half of what is officially claimed.  “The economy is almost 50% wrong – when the government says it’s $3.8 trillion, my estimate is it is probably still $2.5 trillion because we are overestimating the unorganized sector, which is actually declining. This is building up over a period of time,” Kumar told Indian journalist Karan Thapar. 

In its recent assessment, the International Monetary Fund (IMF) has given a "C" grade to India's national accounts. In particular, the IMF has raised the issue of the government using 2011-12 as the base year as being outdated, the discrepancy between production and consumption data and the use of Wholesale Price Index, and not a Producer Price Index, to deflate many economic activities to derive real GDP from nominal GDP. 

The source of the biggest error is the way India estimates the informal economy which, including agriculture, accounts for almost 45% of GDP. To do so, India uses the formal sector as a proxy to estimate the performance of the informal sector. But if the two sectors are moving in opposite directions, as has happened after demonetization, GST imposition and the pandemic, you could end up either overestimating the unorganized sector.

Indian-American economist Ashoka Mody, author of "India is Broken", has argued that the current unemployment crisis in India is a direct result of the destruction of the informal sector, particularly the mom and pop stores that employed a large number of Indians. 

Questions about the veracity of India's official GDP figures are not new. These have been raised by many top economists. For example,  French economist Thomas Piketty argues in his best seller "Capital in the Twenty-First Century that the GDP growth rates of India and China are exaggerated.  Picketty writes as follows:

"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (households have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data." "In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "

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