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Indias growth outlook could face greater scrutiny in the coming quarters as concerns over the credibility and comparability of official GDP estimates complicate the assessment of underlying economic momentum, according to a research report by Systematix.
The brokerage said policymakers, investors and rating agencies may need to place greater emphasis on transparent data and alternative indicators until a comparable historical GDP series and greater clarity on the deflator methodology are available. Systematix Research said the headline 7.8 per cent real GDP growth in Q1FY27 may overstate the underlying pace of expansion, pointing to the unusually low 2.5 per cent GDP deflator used to convert nominal growth into real growth. The brokerage said this compares with around 4 per cent CPI inflation and WPI/PPI inflation above 9 per cent, raising questions over whether the reported real growth rate adequately reflects the prevailing price environment. Using a more plausible deflator of around 6 per cent, Systematix estimates that real GDP growth could be closer to 4 per cent. The brokerae also highlighted the impact of repeated downward revisions to the GDP base. Under the new 2022-23 base series, nominal GDP for FY23-FY26 has been revised down by a cumulative Rs42 trillion, or about Rs10 trillion annually, compared with the earlier 2011-12 base series. Systematix said the latest Q1FY26 nominal GDP estimate has itself been repeatedly revised lower, which mechanically boosts the reported year-on-year growth rate for Q1FY27. According to the brokerage, the absence of a back-cast GDP series before FY23 leaves long-term growth comparisons difficult. It warned that eventual revisions to earlier years could potentially result in a cumulative GDP haircut of close to Rs100 trillion for FY16-FY26. Systematix also questioned the treatment of the informal economy, noting that the new GDP series incorporates data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE), whereas the earlier series relied more heavily on fixed ratios and formal-sector proxies. The brokerage argued that this methodological shift may explain part of the persistent downward revisions. Systematix said the focus should move beyond headline GDP prints to indicators of household income, employment, corporate value addition and nominal GDP growth. It estimated that Indias structural real growth rate may be closer to 45 per cent, given nominal GDP growth of around 9 per cent and inflation of roughly 5 per cent. The brokerage noted that the headline 7.8 per cent Q1FY27 growth figure should be treated as indicative rather than definitive until the authorities provide a transparent back-cast series and greater disclosure on the GDP deflator methodology. (ANI)
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