Where did the ‘missing’ GDP go? SBI Research has an answer

SBI Research has rejected claims of “missing” nominal GDP worth ₹6 lakh crore to ₹42 lakh crore following the release of India’s Q1FY27 GDP data, arguing that such comparisons stem from comparing estimates based on different GDP base-year series. 

In its latest Ecowrap report, SBI Research said comparing estimates based on the earlier 2011-12 base year with those under the new 2022-23 base year is misleading and fails to account for changes in methodology. The report comes amid a debate over India’s national accounts after real GDP growth for the April-June quarter came in at 7.8%. 

GDP revisions are a normal feature of national accounts 

According to SBI Research, revisions are a standard feature of national accounting and are not unique to India. The World Bank has noted that larger revisions can occur when countries introduce a new reference year or methodology for constant-price estimates. 

The research house analysed quarterly nominal and real GDP data from FY09 onwards and identified 239 revisions across 70 quarters. Of these, 134 were upward revisions and 105 were downward revisions. 

The most key revision in nominal GDP occurred over the 14 quarters from Q1FY23 to Q2FY26, coinciding with the shift in the GDP base year from 2011-12 to 2022-23. During this period, nominal GDP was revised downward by ₹41.8 lakh crore, equivalent to about 4.1% of cumulative GDP for those quarters. By comparison, the 56 quarters preceding Q1FY23 saw a cumulative nominal GDP revision of ₹10.1 lakh crore. 

New methodology drives sectoral changes 

SBI Research said the sharp revision in nominal GDP needs to be assessed alongside changes in methodology and sectoral composition. 

Under the new series, GVA for Q1FY23 to Q2FY26 was revised downward by ₹41.1 lakh crore. Around 95% of this revision was concentrated in Trade, Hotels, Transport and Communication, which recorded a downward revision of ₹39 lakh crore. 

In contrast, Finance, Insurance, Real Estate and Business Services recorded a positive revision of ₹13.6 lakh crore. 

According to SBI Research, the contrasting movements reflect improved measurement of informal and formal segments of the economy. The new series uses more granular data from sources such as the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS). 

Trade and related services have a substantial presence of unincorporated enterprises, while corporate and administrative data enable better measurement of finance and other formal-sector activities. 

SBI Research said excluding these subsectors, the overall revision would fall to ₹2.1 lakh crore. It added that the shift also coincides with the broader formalisation and financialisation of the economy through greater banking penetration, digital payments and formal financial channels. 

Real GDP revisions show a contrasting trend 

The research house also highlighted the divergence between nominal and real GDP revisions. 

For the 14 quarters from Q1FY23 to Q2FY26, real GDP was revised upward by a cumulative ₹372 lakh crore, even as nominal GDP declined by ₹41.8 lakh crore. A similar trend was seen during the earlier base-year transition. Between Q1FY13 and Q2FY15, real GDP increased by ₹90.1 lakh crore, while nominal GDP changed by only ₹20,000 crore. 

SBI Research said the divergence reflects changes in the price component of GDP, with lower overall price levels relative to physical output resulting in lower nominal GDP alongside higher real GDP. 

SBI says deflator estimates can be replicated 

SBI Research also addressed criticism over whether publicly available data are sufficient to reconstruct GDP deflators under the new methodology. 

Using publicly available price and volume indicators, the research house estimated agriculture GVA-deflator inflation at 3.74% for Q1FY27, close to the MoSPI-implied 3.77%. Its estimates for mining, electricity and gas, and construction stood at 16.77%, 0.72% and 8.66%, respectively. The manufacturing deflator was estimated at -1.67%, compared with -1.3% implied by MoSPI while the services deflator was estimated at 2.30%, against 2.4%. Overall, SBI estimated GVA-deflator inflation at 3.7%, compared with MoSPI’s 3%. 

High-frequency indicators support 7.8% growth 

SBI Research also pushed back against concerns that leading indicators do not support Q1FY27’s 7.8% GDP growth. It said broad-based economic indicators have remained strong since the pandemic and are consistent with GDP growth remaining above 7% since FY23. 

The research house also pointed to private-sector investment, which averaged ₹3.5 lakh crore annually since FY23, above the ₹3.3 lakh crore average recorded during the six years ended FY19. 

SBI Research said GDP revisions following a base-year change should be assessed in the context of methodological improvements rather than interpreted as evidence of “missing” economic activity.