Measuring India’s true economy

India’s economy recorded 7.8 per cent gross domestic product (GDP) growth in the first quarter of FY26, outpacing expectations and reinforcing the government's optimism about the country’s growth trajectory.

- ASHISH KUMAR & PAYAL SETH

The headline numbers are based on currently available, measurable data and represent the best possible estimates within the existing system.

Yet, we align with experts who caution that these headline figures may not fully reflect reality, as the informal or unincorporated sector— employing more than 90 percent of India’s workforce and contributing nearly half of GDP — remains inadequately measured. This gap risks overstating or understating economic strength and misguiding policy. To fix this, India must move from a topdown model of GDP estimation to a bottom-up approach that begins at the district level, where most unorganised sector activities take place.

A truly bottom-up exercise would ideally build GDP estimates starting from the village level, but given the enormous complexity and resource requirements of such an approach, the most feasible starting point is the smallest administrative unit with structured data systems — the district.

Bottom-up vs top-down: India currently follows a top-down method. National gross value added (GVA) is first estimated and then apportioned to states and districts. States use local data mainly for agriculture, while manufacturing and services are allocated using central indicators that often bear little relation to actual local output. Some states compile district GDP (GDDP), but this is again done by distributing statelevel numbers rather than directly measuring districtlevel activity. While this provides timely estimates, it fails to capture ground realities.