India’s Q1 GDP Growth Sparks Debate on Inflation and Data
Image credit X @NITIAyog
India remains the world’s fastest-growing major economy with Q1 FY2025-26 GDP at 7.8%, driven by strong manufacturing, construction, and services. While analysts hail resilience and government spending, critics flag deflator distortions and low nominal growth as warning signs.
By S JHA
MUMBAI, August 30, 2025 —India’s economy grew at a robust 7.8% in the first quarter (April–June) of FY2025-26, outpacing forecasts and reinforcing its position as the world’s fastest-growing major economy. The growth rate is the highest in five quarters, driven by strong momentum in manufacturing (7.7%), construction (7.6%), and services (9.3%), alongside resilient government spending and private consumption.
Radhika Gupta, MD of Edelweiss Mutual Fund, hailed the numbers on X: “At 7.8%, Q1 GDP growth is a very strong number and certainly better than expectations, given global headwinds. A testament to the resilience of India’s economy, driven by strong government spending. Consumption growth has green shoots and will start to improve with taxation reforms.”
Geopolitics commentator Velina Tchakarova called India’s trajectory “remarkable,” noting that it has once again outpaced global peers despite external challenges.
Former CBEC Chairman Najib Shah told AIR News that the performance “reflects the strong fundamentals of the Indian economy” and surpasses projections, which had pegged growth around 6.5%. Economist Siddharth Kalhans added that the numbers reflect “continuity” from the previous quarter’s 7.4% growth.
However, some analysts urged caution. HSBC flagged that deflator issues amid falling commodity prices may have overstated growth by about one percentage point, putting “true” GDP expansion closer to 6.5–7%, still above trend. Barclays maintained its FY2025-26 growth forecast at 6.5%, citing upside surprises in manufacturing and services but a slowdown in agriculture.
Author Manoj Arora struck a critical note, arguing that low nominal GDP growth at 8.8% — the weakest since Covid — combined with 1% inflation, raises questions about data quality. He wrote: “Do you really see only 1% inflation around you — in school fees, groceries, or utility bills? This management of numbers cannot last long.”
With official and independent voices divided, India’s Q1 GDP data has sparked both optimism about economic resilience and concern about underlying vulnerabilities.
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