India’s GDP Numbers Reveal a Growth Upshift, Not a Statistical Mirage

The release of quarterly estimates of gross domestic product (GDP) for the first quarter of 2026-27 has brought jubilation to the nation. Quite justifiably, in view of the remarkable resilience that India has shown in the face of frozen conflicts and maritime choke points that the period of the release coincides with. 

Amidst the robust optimism, conspiracy theories have also made their way into the public domain, and in their train, competent technical rebuttals by some who have soiled their hands in the data.

The methodological improvements brought in under the new series, such as new surveys, new data sources, broader coverage, removal of duplication, improved methodologies of estimation, double deflation, and new price indices, were all telegraphed ahead of the release of the new GDP series.

By addressing long-pending data quality concerns, especially the outdated base year, the use of the wholesale price index in the deflator, single deflation and sizable discrepancies, they strive to match global best practices and are hence welcome steps forward.

A wide array of high-frequency indicators of economic activity, not subject to base year revisions, corroborates the acceleration in momentum revealed by the GDP release. And arithmetical gymnastics of using the new series as numerator and the old series as denominator without the use of linking factors isn’t impressing public opinion. It has been called out as ‘a category error produced by mixing series.’

We need to back our national accountants to do what they do best.

Moving away from the heat and dust after ‘the tumult and the shouting dies,’ let’s look at the internal consistency of the numbers. It’s a good breathalyser for those who have been there, done it.

 GDP is Just the Sum of its Parts

The headline real GDP growth in April-June 2026-27 has turned out to be a broad expansion, supported by private final consumption, gross fixed capital formation and exports. 

Consumption has been insulated from the war in West Asia by tax cuts, higher subsidies across fertilisers, food and oil, minimum wage increases, and expansionary monetary conditions, including a pick-up in personal loans. In fact, growth in petroleum consumption rebounded in July after the contraction in April-May started to ease in June. Spending on consumer durables has picked up. Typically, consumption growth is seasonally slower in the first quarter, but on the base it has gained, a brighter showing is plausible in the second half of the year as the festivals set in. Even so, consumption remained the largest contributor to overall GDP growth at 51%. Although the growth of government final consumption eased relative to that of private consumption as it had done a year ago, total consumption posted a healthy growth of 6.7% and remained the mainstay of aggregate demand.

A pleasant surprise is the surge in capacity creation, embodied in fixed capital formation, that has been building up since the second quarter last year. In fact, April-June 2026-27 recorded the strongest investment expansion in 4 years, excluding the pandemic year.

Central government finances for the quarter indicate a front-loading of capital expenditure, with public sector enterprises also contributing to the investment expansion. This could also be signalling the long-awaited return of momentum in private capital spending, given the improvement in operating profit growth of manufacturing and services companies during the quarter.

All in all, fixed capital formation matched consumption in terms of its weighted contribution to overall GDP growth in April-June 2026-27. India’s gross domestic investment rate, which includes gross fixed capital formation, changes in stocks and valuables, rose to 36.3% of GDP in the quarter, which augurs well for the future of an economy that relies on capital accumulation as its driving force.

Another boost came from export growth. Merchandise exports rose by close to 16% in the quarter, driven up by electronics, petroleum products, and engineering goods, while services exports expanded by 6%. With imports contracting under the impact of duties on gold, net exports contributed more than a third of the overall GDP growth in April-June 2026-27. 

With higher subsidies and the tax cuts, the growth of gross value added at 8.2% turned out to be even higher than real GDP growth. Agriculture growth was just a shade below its long-term trend.  Manufacturing growth accelerated to a three-quarter high year-on-year, consistent with industrial production and the investment side developments. Services growth remained the strongest among the constituents of aggregate supply, despite moderation in trade, hotels and transport, reflecting a moderation in air passenger traffic. Nevertheless, services accounted for more than 75% of GVA growth. In April-June 2026-27, services constituted 65% of the economy, with agriculture and industry accounting for 17% and 18%, respectively.

The Bigger Picture

The outcome for April-June 2026-27 validates what some of us have been pointing to: that after the rebound from the COVID-19 pandemic, India is breaking out into a structural upshift in its growth trajectory. For the period 2021-22 to 2025-26, real GDP growth averaged 7.7%.

The Principal Secretary to the PM, Shaktikanta Das, has indicated that 8% growth is within striking distance. A cyclical upturn starting in July-September 2025-26 overlies this emerging trend. If the period from July-September 2025-26 to April-June 2026-27 is taken into account, real GDP growth just exceeds 8%.

The losses on account of the pandemic did set India back substantially, but at this pace, catch-up will be sooner than otherwise.

The Clearer Picture

Revisions to past data also have a story to tell. The Russia-Ukraine war that broke out in February 2022 ignited in its wake one of the highest and most prolonged inflation surges in history worldwide, rivalling the high inflation experience of the 1970s. All over the world, central banks, blindsided by the pandemic and believing that inflation was a supply-side phenomenon till then, swung into action. What followed was a sharp, synchronised tightening of monetary policy the world over. India was not immune.

By April 2022, inflation climbed to 7.8%, breaching the upper tolerance band of the flexible inflation targeting corridor. True to its mandate, the RBI swung into action. Calling an off-cycle meeting of the monetary policy committee in May 2022, the policy rate was raised by a cumulative 250 basis points between then and February 2023, and an anti-inflation stance was maintained right up to January 2025.

Inflation was perniciously persistent, but eventually the RBI’s relentless strategy turned the tide. Inflation eased from 6.2% in October 2024 to within the tolerance band at 5.5% in November, further to 5.2% in December and aligned with the target at 4.3% in January 2025.

For the year 2025-26, aided by the softening of food prices, inflation averaged 2.1%, and core inflation was 4.3%. India enjoyed benign inflation over this period because of the strong anti-inflationary actions and stance during 2022-24.

Yet, the Cassandras cried out then that the RBI had killed growth, overlooking the slaying of inflation.

Today, the revisions to the GDP data for 2023-24 and 2024-25 reveal the true picture. Real GDP growth was 7.3% in 2023-24 and 7.2% in 2024-25, up from 7.0% in 2022-23. The defeat of inflation laid the foundations for an acceleration of this growth to 7.8% in 2025-26.

In closing, I can do no better than quote Principal Secretary Shaktikanta Das from his keynote address at the Business Today summit on February 28, 2026:

“…the latest GDP data for 2024-25 not only aligns with the RBI’s estimates during that year but also dispels the narrative of gloom and doom in certain quarters about the impact of Reserve Bank’s policies on the state of the economy at that time. It unequivocally demonstrates the success of the Reserve Bank’s monetary policy in containing inflation without compromising the growth momentum of the economy.”