GDP debate? The world is raising a toast to India
Fitch Ratings has raised India's growth forecast for 2027 to 6.9% from 6.4%, while S&P Global and Moody's have projected 7% growth, both upgrades following India's strong Q1 GDP growth of 7.8%. The three major global ratings agencies have all upgraded their forecasts, arriving in the wake of India's impressive GDP performance in the April-June quarter. However, this growth figure is sparking a heated debate back home.
Former policymakers are questioning the interpretation of the latest GDP figures, given India's new GDP series. Meanwhile, the government has firmly defended the methodology. Prime Minister Narendra Modi hailed the growth as a "herculean feat" despite global disruptions, including oil price shocks and supply-chain issues. He also dismissed critics, saying "doomsayers were doomed and India bloomed...yet again!"
Former RBI Governor Raghuram Rajan has also questioned why robust economic growth hasn't translated into stronger job creation and foreign direct investment. However, the official debate centers more on how the GDP numbers are measured and compared, rather than whether growth is occurring.
Ratings agencies' justifications for their upgrades hinge on several factors. India's resilience during the US-Iran war and higher oil prices, despite deteriorating terms-of-trade in the first half of 2026, was cited by Fitch. S&P Global and Moody's also highlighted growth in investment, consumption, manufacturing, and services.
Gross fixed capital formation, or investment in physical assets, grew 11.9% in the Q1, while manufacturing expanded 9.2% and private consumption rose 7.1%. Financial, real estate, and professional services saw an increase of about 12.1%.
India entered the new fiscal year facing many of the challenges typically slowing an oil-importing economy, such as geopolitical tensions, high crude prices, shipping disruptions, global trade uncertainties, and the threat of higher US tariffs. Yet, despite these pressures, the economy expanded 7.8% in Q1, raising questions about what is driving India's growth.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
