Raghuram Rajan clarifies his stand on GDP: If growth is strong, why aren’t private investment, FDI and jobs rising?

Former Reserve Bank of India governor Raghuram Rajan (REUTERS)AI Quick ReadRaghuram Rajan has clarified that he has neither questioned nor endorsed India’s latest GDP growth figures and has nothing further to say on the matter. However, he has often been puzzled by the economy’s growth trajectory, and wonders why strong GDP growth has not translated into higher private investment, greater foreign direct investment (FDI) and more decent jobs.

After India's GDP numbers were released on Monday, Rajan said on a Linkedin post, I have nothing to say about the recent GDP numbers and have neither questioned nor endorsed them.

“It would be reasonable to say that I have puzzled over the path of our GDP numbers for a while -- why don't we see more private investment, more FDI, and more decent jobs if they are growing so strongly?”

That is different from questioning every last number. I leave that to those who are more expert than I am in GDP calculations, he adds.

According to data released by the Ministry of Statistics and Programme Implementation (MoSPI), India’s real GDP grew 7.8 per cent year-on-year in Q1 FY27.

However, the GDP numbers have come under scrutiny amid concerns over the recent base-year revision.

Subhash Chandra Garg, formerly the top Finance Ministry bureaucrat,commented that growth was inflated because the government had reduced its measure of gross domestic product for the year-earlier period, the basis for comparison.

Some private economists have also questioned whether the deflator — a number calculated to strip out inflation from nominal GDP to show the "real" growth rate — understates inflation relative to other price indicators.

India's statistics ministry called a news conference on Wednesday evening to rebut Garg's criticism. A senior statistics official defended the changes to how GDP is calculated, saying the shift in methodology implemented in February was the result of broad consultations.

World Bank's Neelkanth Mishra also came in support of the government, saying that claims questioning the 7.8% growth figure are “obviously wrong”. And further argued that the new GDP series has significantly improved the methodology and credibility of India’s economic growth estimates.

Mishra also pointed out that downward revision to the base is not new information, and it was already known in March.

, Executive Director, World Bank for India, said that claims questioning the 7.8% growth figure are “obviously wrong”. And further argued that the new GDP series has significantly improved the methodology and credibility of India’s economic growth estimates.

If Monday's GDP data had used the old base, nominal growth would have been just 2.6%, rather than the 10.3% reported by the government. But the government says simply comparing the two is not apples-to-apples.

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