India's Q1 FY27 GDP numbers present an apparent puzzle. Real GDP grew by 7.8%, while nominal GDP expanded by 10.3%, giving an implicit GDP deflator of about 2.3%. That looks low against familiar measures of inflation. The explanation lies in what GDP deflator measures, how national accounts (NA) separate prices from volumes, and the unusual price movements during the quarter.
GDP deflator is not another version of CPI or WPI. CPI measures prices households pay for a consumption basket. WPI captures wholesale prices of goods, and omits large parts of the services economy. GDP/GVA deflator is an implicit price measure derived from the current- and constant-price NA, and reflects price movements across a much wider range of domestic activity: consumption, investment, government services, construction, finance and other services. It's not a directly observed price index, or a measure of cost of living. So, there's no reason it should move one-for-one with CPI or WPI.
