Decoding GDP growth: The good, the bad & the data

India's economy grew 7.8% in the first quarter of FY27, surpassing expectations. However, the growth story has been met with mixed reactions. While some believe it is supported by upbeat proxy datasets, others argue that these gains are not being felt on the ground. Economists have delved into a range of macroeconomic indicators to unravel the complexities of the Indian economy's performance.

The data reveals that not all chosen indicators are incorporated in calculating India's GDP. Yet, those left out may still impact perceptions about whether growth benefits the average citizen. Household sentiment, as measured by RBI surveys, appears to be declining amid geopolitical tensions in the West Asia region.

Trade momentum is positive, with export orders growing, even though they have slowed down compared to prior periods. However, foreign capital inflows are unpredictable, and import growth has been faster, posing challenges. Business-related indicators remain strong, with accelerating credit demand, rising capacity utilization above the 75% threshold, improving corporate sales, and a business expectations index above 100.

Labour conditions have shown gradual improvement, with better employment quality and higher wage growth. Nevertheless, wage gains may not meet expectations as inflation remains elevated, and a significant portion of India's workforce is still seeking employment. On the consumption side, the growth of car and two-wheeler sales is encouraging, and tractor sales, indicating rural demand, have been robust.

Yet, industrial output of consumer non-durables, a gauge of rural demand and household spending power, has slowed down. Credit-fueled spending is robust but has raised concerns among some analysts.

Overall, India's economic growth is more than just a statistical aggregation of high-frequency indicators. The final GDP figures, released by the ministry of statistics and programme implementation, are a culmination of various data inputs over time. The revised national accounts series, with a 2022-23 base year, has incorporated more data sources, providing better estimates compared to previous measures.

However, despite these advancements, perceptions of growth might not align with the actual on-ground reality for the average Indian.