The National Statistics Office reported on 31 August that real GDP grew 7.8 per cent in April-June, above both the RBI’s projection of 7.0 per cent and a Reuters poll median of 7.1 per cent. Nominal GDP grew 10.3 per cent, which implies a GDP deflator of about 2.3 per cent. Over the quarter consumer inflation averaged 3.9 per cent and wholesale inflation 9.3 per cent; the deflator sat below both. In manufacturing, real value added rose 9.2 per cent and nominal value added 7.7 per cent, an implied price fall of about 1.4 per cent in a quarter of costly imported oil.

The Ministry of Statistics has a sound technical answer. The new series, rebased to 2022-23 in February, applies double deflation, deflating inputs and outputs separately; its Sources and Methods document of 21 September says 28 of 30 manufacturing categories now use it. When input prices rise faster than output prices, the ministry explained on 2 September, the manufacturing deflator can turn negative. Double deflation measures volume, not purchasing power, and the squeeze that depresses the deflator also depresses margins.

Separate tallies of April-June results by the NSE and Kotak Institutional Equities show listed companies’ sales up by about a fifth but operating profit up only 3.5 to 5 per cent, with margins outside finance narrowing by 2.5 to just over 3 percentage points; Kotak and HDFC Mutual Fund both find margins broadly stable once oil and gas are excluded. The squeeze is the oil bill. Real GDP does not record a terms-of-trade loss. The rupee does. Some critics doubt the history; others, the practice. A Peterson Institute working paper in March by Abhishek Anand, Josh Felman and Arvind Subramanian estimated that growth was overstated by 1.5 to 2 percentage points a year between 2012 and 2023, mainly through inappropriate deflators; it did not assess the new series.

Pronab Sen, India’s first Chief Statistician, told Business Standard on 3 September that nominal growth near 10 per cent was ‘probably right’, but that so low a deflator, with wholesale inflation near double digits, did ‘look suspicious’. P. C. Mohanan, a former acting chairman of the National Statistical Commission, wrote in Outlook Business on 8 September that double deflation is sound in concept but opaque in practice, with little clarity on the price data used or on how the quarterly estimates apply it. Raghuram Rajan, the former RBI Governor, asked in an interview in early September why........

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