THE first GDP estimate for India was made by Dadabhai Naoroji for the year 1867-68, though his estimate was extremely rough. V.K.R.V. Rao made the first careful GDP estimate for 1931-32, and subsequently regular official estimates were made from 1949 onwards. The motivation for the early estimates was to establish the material deprivation of the Indian people under colonial rule, while the regular post-independence estimates were meant to track the progress being made by the country after the achievement of independence. The GDP estimates in short were intimately connected with the coming into being of a “nation”; in fact they were part of the project of “nation-building”. This was true of other countries of the Global South as well, and there was no uniformity, nor even any need for uniformity, in the methodology followed in the different countries for arriving at their respective GDP estimates.

A basic change occurred with globalization, when GDP estimates became necessary for international capital, as inputs for its decision about where to invest on the basis of how a particular economy was doing. GDP estimates then ceased to be a part of the project of nation-building, and became instead a guide for international capital, for which there had to be a standard methodology, so that capital could see at a glance the relative attractiveness of the different locations for its investment. The UN and the IMF prescribed the uniform methodology to be followed across countries; and this came to be widely accepted and implemented.

The needs of international capital also dictated the estimation not of one but of a whole range of figures, the so-called “quick estimates”, the “revised estimates”, and so on, exactly on a par with the range of estimates prepared for advanced capitalist economies. For the deployment of globalized capital, it became necessary therefore to treat the whole of the Global South as if it was fully capitalist, the way that the Global North is, which of course was far from being the case. Very large parts of the economies of countries of the Global South, though deeply and profoundly enmeshed in capitalism, are not themselves capitalist, in the sense of being run essentially on capitalist lines. This is true not just of agriculture where large numbers of peasants continue to eke out a living from the tiny plots they cultivate; it is true also of that segment of manufacturing and trade sectors that belongs to the so-called informal economy and runs on lines that are far from being genuinely capitalist.

For this entire informal economy however there are no regular data on output. There are occasional surveys to find out values of various variables for this sector; but these are few and far between, say once in five years; and they are not censuses, but typically only sample surveys. We cannot therefore get regular data with regard to this sector even on an annual basis, let alone for the range of estimates such as “quick” estimates, “preliminary estimates”, and so on. As a result, in India, while making GDP estimates, the government has resorted to the practice of simply assuming that the trends visible for the organized sector, or even for the corporate sector alone, hold ipso facto for the unorganized sector as well.

This however is a completely baseless assumption. There are, two obvious problems with it. First, whenever there is a shock, say in the form of “demonetization”, or the pandemic, it typically has a stronger and more enduring impact on the unorganized sector than on the organized sector. By attributing to the unorganized sector the same growth-rate as the organized sector therefore there is an over-estimation of the overall GDP growth-rate. It may be thought that this overestimation can only be temporary and would get automatically corrected over time, but this would happen only if there is a census covering the unorganized sector once every few years that sets the record straight; it would not happen with periodic sample surveys. With sample surveys, if the variables thrown up by the survey differ from the original estimate, then the typical assumption would be that the survey does not accurately capture the population variables; or, to be more precise, the assumption would be that the sample survey findings underestimate the population variables for the unorganized sector units. It follows therefore that using organized sector data as proxies for the unorganized sector give a systematic upward bias to the overall GDP growth rate, since it is almost invariably the case that the adverse impact of shocks is greater for the unorganized sector than for the organized sector.

The second problem with this procedure is that over time the organized sector tends to encroach upon the unorganized sector, to replace unorganized sector activities by organized sector activities, as for instance when Amazon replaces the business of a large number of small grocery shops. To take the growth-rate of the organized trading sector as representing the trading sector as a whole, when the organized trading sector in fact is growing partly at least by cannibalizing its unorganized counterpart, is an obvious factor causing an overestimation of the GDP growth-rate.

This is not a specifically Indian problem; it applies to virtually all countries of the Global South, since the economic structure of all these countries is characterized by the existence of substantial unorganised sectors. The GDP growth-rates for all these countries therefore tend to get overestimated for exactly the same reasons that they get overestimated for India.

To say this is not to suggest that the GDP growth-rate is always actually overestimated. There may be other independent reasons why the GDP growth-rate of a country may be underestimated over a certain period; the point is simply that there is a systematic tendency for over-estimating the growth-rate for one particular reason, namely owing to the procedure of taking organized sector trends as ipso facto holding true for the unorganized sector as well.

In fact such overestimation comes in handy for Global South regimes. It is used by them for propaganda purposes, for crowing over their great “achievement” by way of ushering in high GDP growth! What is more, such overestimation is also used, more subtly perhaps, for propaganda purposes by institutions like the IMF that promote neo-liberal capitalism in countries of the Global South. In the pre-neo-liberal, dirigiste period, when there was less of a song and dance about GDP estimates, such blatant methods of overestimating GDP growth rates were scarcely used; but now such overestimation makes institutions like the IMF claim that neo-liberalism has led to an acceleration of the growth rate of the economy. It apparently justifies the pursuit of a neo-liberal trajectory. In the case of India for instance, where even a former Chief Economic Adviser to the central government has argued that the GDP growth-rate between 2012 and 2024 was overestimated by 1.5 to 2 percent, the actual growth rate would have scarcely been much higher than under the preceding dirigiste regime, in which case the claim that India entered a new era of high growth owing to the introduction of neo-liberal “reforms” would have become unsustainable. But pushing up the GDP growth-rate for the neo-liberal period helps in sustaining such a claim. The hullabaloo over the GDP growth-rate therefore has the paradoxical effect of making its estimate more questionable.

The 7.8 percent GDP growth-rate which India is supposed to have achieved during April-June 2026 over April-June 2025, even as the US-Israeli war on Iran was going on, even as the closure of the Hormuz Strait was creating a scarcity of petro-products in the economy, and even as Narendra Modi was emphasizing the need for “belt-tightening” because of the difficult economic situation facing the country, represents a reductio ad absurdum of this entire process. Commentators have pointed to various reasons that underlie this gross overestimate; among them was the sharp downward revision of the current price GDP estimate for the first quarter of 2025 which lowered the base on which the growth rate for 2026 Q1 was calculated, and hence gave an upward push to the quarterly growth-rate. But this upward push must also be located within the general tendency towards over-estimation of GDP growth-rates in the Global South that characterizes neo-liberal capitalism.