The state of India’s economy is not as bright as GDP data may suggest

Subscribe to enjoy similar stories. Estimates of gross value added (GVA) and gross domestic product (GDP) for 2024-25 were released last month along with revised estimates for 2023-24 and final data for 2022-23. The numbers for 2024-25 were broadly in line with estimates released earlier, with GDP growth placed at 6.5%, marginally higher than the 6.4% reported as part of India’s first advance estimates.

However, numbers for earlier years were significantly revised upwards, with GDP growth in 2023-24 estimated at 9.2%, as against 8.2% reported in January. Similarly, GDP growth in 2022-23 was upped from 7% to 7.6%. These upward revisions offer hope for a better economic performance than the gloomy picture presented by the January figures.

While GDP estimates do get revised based on fresh data, the extent of it this time is unusually large. In any case, stronger growth suggests a sharper economic recovery than what other data sources indicate. However, a closer look at the disaggregated official data and evidence from other sources suggests that any euphoria on this count may be misplaced.

First, annual GDP growth rates are not the best way to judge the structural and fundamental strengths of our economy. High growth in 2022-23 and 2023-24 came on a low base in previous years, when output suffered from a slowdown and then the pandemic. GDP growth rate in the five years ending 2024-25 has been a modest annual average of 5.3%, the lowest in the previous three decades for any five-year period.