Tuesday, 17 Feb, 2026
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India’s economic activity is facing pressure from falling wages, shrinking corporate profits, and persistent inflation, curbing growth momentum as reflected in the recent GDP slowdown. The RBI has kept interest rates steady for nearly two years, citing inflation concerns.
India’s gross domestic product (GDP) figures have long been a reliable benchmark for investors, setting the country apart from China’s often-questioned economic data. The Centre’s decision to create a new committee to update national accounts provides a critical opportunity to refine and modernise GDP calculation methodologies. This initiative aims to improve transparency, address concerns over data accuracy, and restore investor confidence in New Delhi’s economic reporting. By implementing a more robust framework, India positions itself as a dependable source of growth data, reinforcing its role as a key player in global economic assessments.
Experts say that modernising national accounts statistics is both timely and necessary. The government’s proactive approach to updating these metrics to reflect current economic realities is praiseworthy. Transparency will be crucial to ensuring credibility and public trust in the process.
The panel tasked with this modernisation must tackle valid criticisms of the current methodology. One of the primary concerns is the disproportionate weight given to the deflator, which introduces significant variability in quarterly GDP estimates. Another key issue is the reliability of private sector value-added estimates derived from the Ministry of Corporate Affairs (MCA) database. Discrepancies between MCA data and key economic indicators such as earnings reports, credit growth, and industrial capacity utilisation have raised doubts about GDP accuracy.
The committee should prioritise finding a reliable method to measure the informal value-added component of economic activity in India. A major drawback of the latest GDP series is its limited comparability with previous years, undermining its credibility. This can be addressed by creating a back series that aligns with the new methodology, helping to restore confidence in India’s national accounts.
The recent slowdown in GDP growth, which hit a seven-quarter low in the July-September period of FY25, highlights the economic challenges India faces. Growth decelerated to just 5.4 per cent, a sharp decline from 6.8 per cent in the previous quarter. Sluggish consumption demand and a decline in the mining sector were significant contributors to the slowdown. These figures underscore the challenges India faces as it navigates both domestic and global economic headwinds.
India’s economic activity is also under pressure from falling wages, shrinking corporate profits, and persistent inflation. These factors have curtailed growth momentum, as seen in the recent GDP slowdown. Meanwhile, the Reserve Bank of India (RBI) has kept interest rates steady for nearly two years, citing inflation concerns. The central bank has warned that cutting rates too soon could carry significant risks, emphasising the need for a careful balance between stimulating growth and controlling inflation.
Despite these challenges, former RBI Governor Shaktikanta Das expressed optimism in September about achieving the projected 7.2 per cent GDP growth for FY25. However, the slowdown in the April-June quarter to 6.7 per cent, below both the consensus estimate of 6.9 per cent and the central bank’s own forecast of 7.1 per cent, has tempered expectations. The dip in growth was primarily attributed to reduced government spending during the Lok Sabha elections, which briefly dampened economic activity.
According to the United Nations' World Economic Situation and Prospects 2025 report, India’s economy is projected to grow by 6.6 per cent in 2025 and 6.7 per cent in 2026. This growth is expected to be driven by strong private consumption and investment, reflecting the resilience of the Indian economy despite global economic challenges. The report, released on January 9, highlights India’s promising economic outlook in the coming years.
The Centre expects the economy to grow at 6.5 per cent in FY25, following a subdued first half of the fiscal year. This growth projection is supported by expected gains in agricultural and industrial activity. The Finance Ministry’s Monthly Economic Review, released in December, attributes the slowdown in the first half of FY25 to the RBI’s monetary policy stance, which has contributed to the cautious economic environment.
