A number fight that missed the real question
This week, former Finance Secretary Subhash Chandra Garg went on NDTV and declared India's real GDP growth was 2.6%, not the official 7.8%. A 10-tweet thread subsequently went viral accusing him of elementary statistical error — dividing a number from the new 2022–23 GDP series by a number from the old 2011–12 series. The thread was arithmetically correct. Garg made a division error.
But the thread's arithmetic victory buried the more important question underneath it: if the economy is genuinely growing at 7.8%, why does life feel nothing like it?
That question deserves a serious answer. Not a political one. Not a number fight. The answer requires understanding the difference between measuring an economy and experiencing one — and why, in India right now, those two things have diverged in ways that official statistics are poorly equipped to capture.
"GDP measures total output. It does not measure how that output is distributed, whether the people producing it are being paid more, or whether the gains are going to labour or capital."
The distinction that the entire debate is missingWhy 3.5% never felt like 3.5%
The official Consumer Price Index averaged around 3.5% in FY26. That is a real number, produced by a real methodology. It is also almost useless as a description of what a household experienced.
CPI is a weighted basket. Housing gets 10.07%. Fuel and light gets 6.84%. Food gets 45.86%. The problem is what is inside those weights — and what is outside them entirely.
Fuel costs at the pump are administered prices in India. The government chose to hold retail fuel prices through significant portions of the global oil price cycle, then let them partially through at politically convenient moments. Excise duties on petrol more than doubled between 2014 and 2022. When crude fell, excise stayed high — the government captured the margin. So even in a "low inflation" year, fuel never felt cheap. The state was running a permanent wedge between global prices and domestic reality to protect fiscal revenue. That excise shows up as government income. Not as inflation. Not in CPI.
A family in urban India paying rent, school fees, EMIs on two loans, and fuel for a two-wheeler experienced something closer to 8–10% effective inflation in FY26, even when the headline said 3.5%. The statistical average was technically correct. It was experientially meaningless for the median household.
There is also a timing problem. CPI averaged low through FY26 partly because the period of genuine disinflation ran through mid-2025. By July 2026, CPI had risen to 4.45% — food and beverages at 5.52%, transportation at 4.43% — driven by the energy shock from the West Asia conflict. The RBI now projects CPI peaking at 5.9% in Q3 FY27. The low-inflation story that made GDP look good is already ending.
Growth without jobs — or jobs without growth in wages
Corporate profits at India's largest listed companies climbed 22.3% in FY24. Employment at those same companies grew by 1.5%. The profit-to-GDP ratio for Nifty 500 companies hit 4.8% that year — the highest since FY08, just before the global financial crisis.
In the organised sector: employee compensation at 457 listed companies rose just 4.8% in Q4 FY25. The fifth consecutive quarter of single-digit salary growth. The slowest increase in 17 quarters. Salaries as a share of net sales fell to 12% — below the five-year average of 12.6%.
At the bottom of the wage distribution, the picture is worse. The Labour Bureau's Wage Rate Index shows real wage growth close to zero over the last decade at the national level for rural workers. Not slow growth. Zero. Workers in Haryana, Assam, and Uttar Pradesh saw real wages decline between 2019 and 2024.
"Between 2021–22 and 2022–23, real GDP grew at 7% while real wages declined by almost 3%, on average."
Ideas for India, citing World Bank dataThe structural reason for this is not mysterious. India's GDP growth is concentrated in sectors that do not absorb labour at scale. Services — IT, finance, real estate — account for 54% of GDP but employ approximately 34% of the workforce. Agriculture accounts for 17% of GDP but employs 44% of the workforce. When the economy grows 7.8% driven primarily by financial services and technology, it is visible in national accounts. It is not visible in the wage packet of someone farming, or on a construction site, or working at a small manufacturer.
98% of Indian firms have fewer than 10 employees. They employ 75% of the non-agricultural workforce. These firms are not in the GDP growth story. They are in the survival story. A 7.8% GDP number that reflects what happened at India's largest corporations says almost nothing about the economic experience of three-quarters of non-farm workers.
The savings collapse — the most honest number in the economy
If you want a single indicator of whether the macro growth story is reaching households, net household financial savings is it. And it is telling a deeply uncomfortable story.
| Year | Net HH Financial Savings (% GDP) | HH Liabilities (% GDP) | HH Debt to GDP |
|---|---|---|---|
| FY19 | 7.8% | 4.1% | ~34% |
| FY20 | 8.0% | 3.8% | ~35% |
| FY21 (COVID) | 11.5% | 3.8% | 37.1% |
| FY22 | 7.6% | 4.5% | ~37% |
| FY23 | 5.1% | 5.8% | ~40% |
| FY24 | ~5.4% | 6.4% | 40–41% |
| FY25 | ~5.0% | 4.7% | 41.3% |
Source: RBI, MoSPI, Motilal Oswal Research. Net household financial savings at 5.1% of GDP in FY23 were the lowest since the 1970s oil crisis.
Between FY21 and FY23, gross household financial savings grew at 10.3% annually. Household financial liabilities surged at 30.1% in the same period. The gap is the story.
What is growing fastest within household debt: unsecured personal loans. Not home loans for asset creation. Not business loans for investment. Consumption loans. People borrowing to maintain living standards their incomes can no longer support. The COVID-era savings buffer that households built up has been fully spent. What replaced it is credit.
Between FY09 and FY23, industrial wages rose 1.9 times. Household bank debt grew 2.9 times. By FY25, household debt had risen to 3.6 times its FY09 level. Families are taking on debt much faster than their incomes are growing. That is the lived economic experience that a 7.8% GDP number does not capture.
The distribution of a 7% economy
The macro is not lying. Total output is genuinely growing. The question is who is capturing that output. In India's current growth model, the evidence strongly suggests the gains have disproportionately gone to capital over labour — to the listed corporate sector, to owners of financial assets, to the formal economy over the informal.
Captured the growth
- Listed corporates — profits +22.3% FY24, employment +1.5%
- Nifty 500 — profit/GDP ratio at 17-year high
- IT & GCC professionals — premium skills, global arbitrage
- Real estate owners — prices up in major cities
- Equity investors — Sensex roughly 3× since 2019
- Government — excise revenue from administered fuel prices
- Top income quintile — consumption growing strongly
Outside the story
- Informal workers — ~80% of total employment
- Rural agricultural labour — real wages flat a decade
- Entry-level IT — fresher salaries nominally frozen 3+ years
- Urban renters — costs rising, underweighted in CPI
- Small manufacturers — competing against cheap imports
- Petrol & LPG users — paying structural excise premium
- Bottom three income quintiles — borrowing to consume
This is not a conspiracy. It is the natural output of a growth model that rewards capital-intensive, skill-intensive, formal-sector activity — and has not yet built the manufacturing base or labour market institutions needed to pull the majority of the workforce into productivity gains.
India's labour productivity, at approximately $10.7 per hour of labour input, is among the lowest in the world. The non-agricultural workforce remains smaller than in countries with comparable GDP per capita. The formal sector is too small, and growing too slowly, to absorb the workforce transitioning from agriculture. Growth happens at the top of the pyramid. The base of the pyramid experiences it as a news headline.
What the macro actually shows — uncoloured
Stripping political framing from both directions, this is the honest state of India's macro fundamentals heading into FY27.
| Parameter | FY24 | FY25 | FY26 | FY27 Outlook | Honest Assessment |
|---|---|---|---|---|---|
| Real GDP growth | 7.2% | 7.1% | 7.6% | 7–7.4% | Genuine. Stable. Fastest major economy. |
| Dollar GDP | ~$3.53T | ~$3.57T | ~$3.60T | ~$4.15T | 2% growth over 2 years. Rupee erosion kills dollar gains. |
| Global rank | 5th | 5th | 6th | 6th | Slipped. 4th by FY26 was promised. Did not happen. |
| CPI inflation | 5.4% | 4.9% | 3.5% avg | 5.0–5.9% | Was genuinely low. Now rising. West Asia risk. |
| Real wages | ~0% | ~0% | ~0% | ~0% | Decade-long stagnation. The macro-micro gap in one line. |
| Current account | -1.0% GDP | -0.6% GDP | -0.6% GDP | Widening | Structurally sound. Services surplus is the load-bearing wall. |
| Forex reserves | $645B | $715B | $691B | Adequate | Strong. Down $24B in FY26 on RBI intervention. |
| Merch export growth | –0.1% | +0.9% | +0.9% | Uncertain | Near-zero for 3 years. Not a cyclical problem. |
| Pvt capex (GFCF %GDP) | 10.1% | <11% | ~11% | Early revival | Peak was 16.8% in FY08. Far below. Govt substituting. |
| Net HH savings | ~5.4% | ~5.0% | Low | Structural | Lowest since 1970s. Households borrowing to consume. |
| Govt debt/GDP | ~82% | ~82% | 58% (central) | Target: 55.6% | Series change complicates target. Path harder than it looks. |
Sources: MoSPI, RBI, World Bank, IMF WEO April 2026, Labour Bureau WRRI. Real wage data from Labour Bureau Wage Rate Index, rural workers.
Why the macro can be right and the lived experience wrong — simultaneously
This is not a contradiction. It is a description of how growth works when it is narrowly distributed.
India's growth model rewards capital-intensive, skill-intensive, formal-sector activity. When financial services grow 12%, it appears in GDP. It does not appear in the income of a construction worker. When corporate profits hit 17-year highs while employment grows 1.5%, that too appears in GDP — as higher value-added in the corporate sector. The GDP number accurately captures the aggregate. The aggregate does not represent the median.
The debt picture is perhaps the most telling. A country where household savings are at 50-year lows and household debt is at 17-year highs — while GDP grows at 7%+ — is a country where the bottom half of the income distribution is funding its consumption through credit rather than income growth. That is unsustainable. It is also, by conventional macro metrics, counted as growth. Private consumption is a GDP component. It doesn't matter, for the purposes of the headline number, whether that consumption came from income or from an NBFC loan.
"The macro is the average. You are not living the average. Nobody is."
The fuel cost question is a specific and important case of government arithmetic working against household arithmetic. Excise duties that fill the fiscal deficit show up as contained government borrowing in the macro data. They show up as ₹12–15 extra per litre at the pump in real life. The macro looks consolidated. The household budget looks squeezed. Both are true.
The export weakness — merchandise export growth near zero for three consecutive years — matters because manufactured goods exports are the mechanism through which GDP growth typically reaches ordinary workers at scale. You cannot build a broad-based wage economy on services exports alone. China's two decades of wage growth came from manufacturing employment at scale. India has not built that yet. Until it does, 7% GDP growth and 0% real wage growth can coexist indefinitely.