India's economy grew by a robust 7.8% in the first quarter of this year, exceeding predictions but quickly igniting debate over the data's credibility.
This strong start provided a lift for Prime Minister Narendra Modi, who has been under fire for issues like exam paper leaks and rising youth unemployment. The growth indicates that his administration has skillfully handled the Middle East oil shock, despite India's significant reliance on imported crude.
For six months, India's "cyclical growth recovery" had been noticeable, according to a chief India economist at JP Morgan. This recovery was driven by hefty fiscal stimuli, including direct tax cuts in February last year and a reduction of consumption taxes in September. Interest rates have also been reduced by about 1.5% since early 2025.
Delhi's quick diversification of energy imports after the Hormuz blockade helped sustain growth. Exports rose sharply by 12%, overcoming tariff uncertainties thanks to strong global demand and a weak exchange rate. Economists estimate a 15% decline in the Indian rupee against the US dollar likely boosted companies' competitiveness, increasing demand for Indian products.
Private corporate investments, a perennial concern for economists, also surged. India's gross fixed capital formation, a critical indicator of total domestic public and private investment, increased nearly 12% in the first quarter of this year. Madan Sabnavis, chief economist with the state-run Bank of Baroda, noted that non-government data shows rising investment intentions, especially in sectors like data centers, renewable energy, and metals.
Despite these encouraging signs, the figures have sparked a heated debate among politicians and economists. Opposition figures, including Jairam Ramesh, dismissed the numbers as "statistical gymnastics, " accusing the government of manipulating methodology to hide India's "dire economic reality."
A former finance secretary also questioned the GDP increase, attributing it to calculations based on newly revised numbers and a lower base from the same period last year. The government, however, strongly denied these claims, arguing that revisions are a routine part of GDP calculations. Neelkanth Mishra, the World Bank's executive director for India, backed the government's position, stating that the new GDP series "cleaned up the data and also significantly improved the methodology, " enhancing the credibility of estimates.
India's new GDP series, a revised method for measuring the economy's size, has significantly lowered the estimated GDP level in previous years. This revision automatically makes current growth appear much higher than it would have been otherwise.
Beyond these statistical nuances, former central bank governor Raghuram Rajan questioned why such rapid growth wasn't creating more jobs or attracting more foreign direct investment. The stock markets largely shrugged off the positive news, complicating the picture for authorities who had hoped the figures would counter criticism about the uneven nature of India's growth path.
