“Indian officials have been in a boastful mood lately. A government report in December argued that judging by real-time economic indicators, India had overtaken Japan as the world’s fourth-biggest economy. This was to become economic fact once the Ministry of Statistics and Programme Implementation updated how it calculates GDP. So in one sense, the new numbers released on February 27th are a disappointment: GDP was 3.3% smaller than previously thought. In other ways, though, they are a cause for celebration.

The methodological update, the first since 2015, reset the ‘base year’—which sets the weights for different parts of the economy—to 2022. It also added new data sources that capture a clearer picture of the Indian economy. The country looks more rural than before. Agriculture, responsible for 18% of GDP, appears bigger, largely thanks to more detail on fisheries and dairy. Finance and business services also produced a bit more output, while commerce, hotels and transport generated 26% less. The net effect is a service sector that looks 8% smaller than it did using the previous methodology, and makes up 41% of the economy. Manufacturing, which accounts for 15%, has also shrunk slightly.

On the bright side, India is growing even faster than previously believed. GDP expanded by 7.1% in the fiscal year 2024-25, up from an earlier figure of 6.5%. Other numbers show it has grown quickly since, despite facing high duties on exports to America.”

From The Economist.