Data released on Monday (August 31) showed India’s economy performed better than expected despite a host of global challenges. In the April-June quarter of FY2026-27, the country’s GDP grew by 7.8 per cent, against 6.9 per cent in the same quarter last fiscal.
The government is also upbeat about the numbers, with Prime Minister Narendra Modi describing the growth as a result of the hard work and strength of the people.
What does the actual number say?
But, experts warn that the number might actually not mean equal growth across sectors of the economy. At a time when the West Asia crisis has pushed up the prices of crude oil and other commodities, uncertainty continues to cloud the global economy, and India faces challenges ranging from employment to raising incomes.
Also read: PM Modi lauds 7.8 pc GDP growth, takes ‘jhoot ki goonj’ swipe at Opposition
Speaking to The Federal Desheconomist Vijay Sardana said such growth is not particularly surprising for a developing country like India, with a population of 1.45 billion, where demand for basic necessities remains strong, leaving considerable room for further growth.
However, Sardana said, it would be incorrect to understand the entire economic picture simply by looking at the headline figure of 7.8 per cent. The real questions remain: where is the growth coming from, and which parts of the economy are benefiting from it?
Is there equal growth?
The GDP data shows strong performance by the manufacturing and services sectors. The services sector recorded a healthy 10 per cent growth, along with strong performance from finance, real estate and other professional services.
But Sardana compared the growth rate between the manufacturing sector and agriculture and mining, the primary sectors from where raw materials for manufacturing are procured. “Factory output is rising, but the sectors that provide raw materials within the country are not growing at the same pace,” he added, raising the question of India’s dependence on imports.
Sardana explained his concern through the example of mobile phones. “Mobile phone production and exports from India have risen sharply. But if large quantities of parts and other components required to manufacture those phones are imported, the true strength of domestic manufacturing cannot be assessed simply by looking at the value of the finished phones.”
Also read: India’s economic growth rate to weaken at 6.6 pc in FY27 on trade shocks, weak consumption: BMI
The economist argued that it is important to know how much of a product being made in India actually consists of goods and raw materials produced in India. “The question, therefore, is not just about “Made in India” but also “Value Added in India,” he remarked.
GDP and employment
Sardana also raised a major question about employment in relation to the GDP data. According to him, economic growth matters most to ordinary people when it translates into higher employment and incomes.
India is spending heavily on infrastructure. Roads, highways and other projects are being built, driving demand for cement, steel and machinery, which in turn contributes to GDP. But, “GDP figures should be assessed alongside improvements in people’s real incomes,” said Sardana. “If the economy grows at 7.8 per cent but the earnings, employment opportunities and purchasing power of ordinary households do not rise correspondingly, a gap will remain between headline GDP growth and people’s everyday economic experience.”
Economic indicators
To understand the health of the economy, he said, GDP must be viewed alongside indicators such as employment, per capita income and household consumption.
Sardana also raised concerns over exports. While exports boost production and earn foreign exchange, the benefits are limited if much of the raw material used to make those products is imported.
Also read: World Bank ups India’s FY27 GDP growth projection to 6.6 pc; flags West Asia uncertainty
Modi has congratulated citizens on the GDP figures. At the same time, he has urged people to avoid buying gold and to reduce spending on foreign travel, raising concern on the strength of the economy.
Sardana sees foreign-exchange expenditure as an important reason behind these appeals. India imports a significant share of what it needs. The country needs dollars particularly to pay for crude oil and several important industrial goods. A large share of the gold consumed in India is also imported.
When Indians travel abroad or hold large events overseas, the spending involved adds to the demand for foreign currency. In contrast, if the same money is spent within India, it benefits hotels, tourism, transport, catering, textiles and other domestic businesses.
The broader message, therefore, is that strengthening the country’s growth requires both higher domestic production and stronger domestic spending.
Can India sustain the current growth?
However, experts are sceptical whether India can maintain the same pace of GDP growth. In the months ahead, India’s economy will be affected by developments in West Asia, crude oil prices, global demand and the state of international trade.
If crude oil remains expensive for an extended period, India’s import bill could rise. This could increase costs for companies and put pressure on inflation. A slowdown in the global economy could also affect Indian exports.
So while the 7.8 per cent growth recorded in the first quarter is certainly strong, it cannot be treated as a guarantee for the full year.
Rajiv Sharan, Head of Research at Brickwork Ratings, said sustaining such a high growth rate of 7.8 per cent in the coming quarters could be difficult. Growth could moderate in the second half of the year. “We estimate that GDP growth for the full financial year 2026-27 will be around 6.7 per cent,” he said.
India’s first-quarter GDP growth presents a strong picture compared with other major global economies. The acceleration in manufacturing and services is also a positive signal. But according to Vijay Sardana, instead of celebrating the headline number alone, it is more important to examine what lies beneath it.
