GDP, IMF ranks India "C" and
Indian Rupee is falling against the US dollar
GDP:
Economists like former CEA Arvind Subramanian have suggested that India's GDP calculation is overestimated, despite the government defending its methodology. These criticisms stem from the country's reliance on out-of-date data, assumptions for the large unorganized sector, problems with the deflator (WPI vs. CPI/PPI), data gaps for quarterly estimates, and differences between production and expenditure methods.
Important objections and worries:
Outdated Base Year & Deflator: Unlike a Producer Price Index (PPI) or CPI, India utilizes the 2011–12 base year and WPI (Wholesale Price Index) for deflation, which does not adequately reflect the expanding services sector.
Data Gaps in the Informal Sector: Particularly following events like demonetization or GST, estimations of the enormous unorganized and informal economy may be inaccurate due to the heavy reliance on assumptions and outdated surveys.
Production versus Expenditure Discrepancy: Recent years have shown significant positive disparities between GDP estimated from the production side (value added) and the expenditure side (spending), indicating mismeasurement.
Quarterly Approximations: Quarterly estimates are based on assumptions and may not accurately reflect short-term changes due to a lack of timely and reliable primary data.
Overestimating Statements: Although this was debatable, former chief economic advisor Arvind Subramanian asserted that methodological changes caused India's GDP growth to be overestimated by almost 2.5 percentage points between 2011 and 2017.
The co-founder of Hotmail, Sabeer Bhatia, has harshly criticized India's GDP calculation method, calling it "basic maths" that the nation is doing "completely wrong." He went on to say that the entire nation is "lying about GDP" and contrasted it with the approach taken by other nations, including the US, where GDP is closely correlated with actual labor hours and labor value.
In a podcast with a San Francisco YouTuber, Bhatia discussed his "brutal observations and counsel for India."
"India's GDP calculation is incorrect."
On the podcast, Bhatia declared, "The entire nation is lying, our GDP is all wrong. You only need two seconds to have a look at how they are computing GDP."
Everywhere in the globe, including the United States, GDP is calculated using the total number of person hours worked by all. Everybody is paid on an hourly basis. Bhatia continued, "Everyone calculates how many hours of work they put in, reports that to the government, pays a certain amount of tax, and that determines your GDP."
Bhatia continued by outlining what he saw to be a weakness in the Indian system. In India, if I give you Rs 1000, 18% GST is applied, and if you return Rs 1000 to me, the same 18% GST is applied. It is valued at Rs 2,000 GDP. Neither you nor I have completed any job. I simply gave you my money. Giving money is not a job.
This is fundamental math, I'm saying. We are miscalculating GDP. Nevertheless, our economy will grow to be worth 4.2 trillion, 20 trillion, or 15 trillion. No matter how many trillions we make, it doesn't matter to me. We're counting it incorrectly," he continued.
IMF:
Arun Kumar, a former professor of economics at Jawaharlal Nehru University, and Pronab Sen, India's former chief statistician, stated that the country's GDP is unreliable in two parallel interviews that were presented as a single package to discuss the IMF's decision to give India's national accounts statistics, which include important figures like GDP and GVA, a "C," the second lowest grade.
They claimed that India's estimation of the unorganized sector, which includes agriculture and accounts for over 45% of GDP, is the source of the issue. In order to do this, India estimates the performance of the unorganized sector using the organized sector as a stand-in. However, if the two sectors are heading in different paths, as was the case following the epidemic, GST, and demonetization,..
According to Arun Kumar, the real GDP of India is likely 48% lower than the official estimate. Additionally, he finds it extremely hard to accept the 8.2% GDP growth rate for the second quarter that was announced yesterday.
"We are overestimating the unorganized sector, which is actually falling, so even though the government claims it is $3.8 trillion, my estimate is probably still $2.5 trillion. The economy is over 50% inaccurate." This is accumulating over time, according to Kumar.
Prices for consumers
The GDP statistic we routinely generate is currently "no better and no worse than what it was 10 years ago," according to Pronab Sen. Sen pointed out that "we make a lot of assumptions" and "we just don't have quarterly data for most things" when it comes to the quarterly GDP estimates.
You now have to rely on assumptions in the absence of data. You strive to do the best you can by looking at previous partnerships and trends. However, this issue won't be resolved until we reach a point where the majority of the data required for quarterly estimation are physically gathered," he continued, implying that even the greatest efforts at this point won't be sufficient to do so. Sen acknowledged that, despite the lack of clear solutions, we might be overestimating the unorganized sector. Sen points out that the bases are frequently out of date and fail to take shifting consumer markets into consideration.
Sen stated that although the GDP growth rate in agriculture is 3.5% or 3.6%, the prices of agricultural products have been declining. Sen expressed doubts about the GDP growth rate of 8.2% for the second quarter, which was formally announced yesterday. He acknowledged that inflation is modest, but said it is difficult to understand that it is only 0.5% when nominal GDP is 8.7%.
rupee is falling against dollar
The Indian rupee is falling to all-time lows and is practically in free fall mode. The currency's deterioration run over the previous few days continued on Wednesday morning as it broke through the 90 mark versus the dollar. The currency has lost more than 5% of its value so far this year.
#1 Reduced RBI support and a slowdown in capital inflows
A significant slowdown in capital inflows and a decrease in Reserve Bank of India (RBI) involvement are contributing factors to the rupee's decline. The RBI sold a net $55.8 billion through spot and forward markets between October 2024 and January 2025 of last year. Only in August 2025 did this year's intervention get up speed, with the RBI unloading $36.3 billion between August and November.
"The shift reflects the build-up of net dollar short positions in the RBI's forward book," according to IDFC First Bank.
The forward book was already $84.3 billion as of March 2025 at the beginning of FY26, which made it more difficult for the central bank to deploy buy-sell swaps without depleting spot dollar sales liquidity. By lessening the strain on the liquidity of the banking system, less foreign exchange intervention has also promoted monetary policy autonomy.
# 2 US-India trade agreement postponed
The negative trade moves against India are another factor contributing to the decline. Earlier this year, the US levied a high 50% tariff on India. India has recently cut back on its purchases of Russian oil, but the two nations were still unable to come to a trade agreement, and the effective tariff is still in place.
#3 Record-breaking prices for bullion and metals
"Record-high metal and bullion prices have further worsened India's import bill," according to Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, in addition to high US tariffs that continue to limit export competitiveness.
#4 External borrowing and soft FDI
This year, foreign investors have removed almost $17 billion from Indian stocks, although net foreign direct investment flows have remained low. External commercial borrowings have been weak, adding to the burden and demonstrating how widespread capital outflows have increased rupee pressure.
