Where's the GDP debate? The world is raising a toast to India

The world seems to be raising a toast to the Indian economy. Fitch Ratings on Wednesday raised India's FY27 growth forecast to 6.9% from 6.4%, hours after S&P Global Ratings projected 7% growth, up from its earlier 6.6%. Moody's had already raised its forecast to 7% from 6% last week.

Three major global ratings agencies, three upgrades, and all arriving after India reported 7.8% GDP growth in the April-June quarter.

Also Read: After S&P & Fitch, ADB raises India's growth aim to 7% but El Nino clouds food story


But back home, that very 7.8% number has become the centre of a heated debate.

Former policymakers have questioned how the latest GDP figures should be interpreted following India's move to a new GDP series, while the government has strongly defended the methodology.

Prime Minister Narendra Modi seized on the numbers as evidence of the economy’s ability to withstand global disruption.

“India’s exemplary GDP growth of 7.8 per cent during Q1 of FY 2026-27 is a herculean feat,” PM Modi said in a post on X, adding that the growth came despite oil price shocks and supply-chain issues.

He also took a swipe at critics: “Doomsayers were doomed and India bloomed...yet again!”

However, former RBI Governor Raghuram Rajan has also questioned why rapid economic growth has not translated into stronger job creation and foreign direct investment.

Also Read: Fitch raises India FY27 GDP growth forecast to 6.9% from 6.4%, sees 25 bps RBI rate hike in October

Why the world is getting more bullish on India

Fitch's latest upgrade raised its FY27 growth forecast by a sizeable 50 basis points, saying India's 7.8% expansion in the June quarter showed that “the economy has shown resilience in the face of the shock from the US-Iran war, despite the strong terms-of-trade deterioration seen in the first half of 2026."

Just a few hours earlier, S&P Global Ratings raised its FY27 forecast to 7% from 6.6%, while Moody's last week lifted its projection to 7% from 6%.

The upgrades come alongside growth in investment, consumption, manufacturing and services, as well as strong credit expansion.

Gross fixed capital formation, a measure of investment in assets such as factories, machinery and infrastructure, grew 11.9% in the June quarter. Manufacturing expanded 9.2%, while private consumption grew 7.1%. Financial, real estate and professional services grew about 12.1%.

India entered FY27 facing many of the pressures that would normally be expected to slow an oil-importing economy: war in West Asia, crude prices above $100 a barrel, disrupted shipping routes, global trade uncertainty and the threat of higher US tariffs.

Yet the expected economy-wide slowdown did not arrive in the first quarter.

Also Read: S&P Global Ratings raises India FY27 growth aim to 7% from 6.6%, estimates 25 bps RBI rate hike

What is pushing India's output?

Investment is emerging as one of the biggest pieces of the puzzle.

For years, government capital expenditure did much of the heavy lifting while economists waited for private companies to begin investing aggressively again. There are now signs that the private investment cycle is strengthening.

Fitch expects investment to rise more than 10% this fiscal year and pointed to non-food credit growth of 19% year-on-year in July.

Companies are putting money into areas such as manufacturing, power, data centres and industrial capacity. At the same time, government spending on roads, railways, ports, power and other infrastructure continues to support activity.

That creates a potentially important combination: public investment is no longer the only major source of capital expenditure.

Domestic consumption is another buffer.

India's huge internal market means its growth is less dependent on exports than many other major Asian economies. Households continued spending despite higher energy costs, with consumption expanding 7.1% in the June quarter.

Also Read: Why was ₹6 lakh crore shaved off last year’s GDP? Govt explains the numbers

Services, which make up the largest part of India's economy, have also remained strong. Financial, real estate and professional services expanded rapidly, while trade, hotels, transport and communication continued to grow.

Manufacturing, meanwhile, grew 9.2% despite higher energy and input costs.

Put together, India currently has several engines working at the same time: consumers are spending, companies are investing, banks are lending, factories are producing and the government continues to build infrastructure.

That is a large part of what the ratings agencies are responding to.

Then where is the GDP debate?

The argument is less about whether economic activity is growing and more about how the official GDP numbers should be measured and compared.

Former Finance and Economic Affairs Secretary Subhash Chandra Garg has raised questions about comparisons following India's shift to a new GDP series.

Garg said the real GDP figure for the first quarter of the previous year was originally released under the old series, while a revised figure under the new series is now being used as the base for calculating growth.

“I think this is a serious question which we should really examine. The growth 7.8 per cent in this quarter on the face of it looks very good,” Garg said.

He argued that the numbers should also be examined at current prices.

“Therefore, comparing it with that base should be taken with a little bit of a pinch of salt. The better sort of analysis is done in terms of the GDP growth in current prices,” Garg added.

Former RBI Governor Raghuram Rajan has raised a different question: if India is growing this rapidly, why has the economy not produced stronger employment and foreign direct investment?

The government has rejected the criticism, saying last year's GDP estimate changed because India moved to a new GDP series and incorporated updated data, not to make this year's growth look stronger.

Also Read: India growth seen moderating in second half of FY27 as inflation, liquidity pose risks: DBS

Q1 FY26 GDP at current prices was initially estimated at Rs 86.05 lakh crore under the old 2011-12 base-year series. Under the new 2022-23 series, that figure was revised to around Rs 80 lakh crore.

The government said the two cannot be directly compared because they were calculated under different series. “It is therefore incorrect to interpret the difference as a deliberate downward revision of last year’s GDP to mechanically increase the current year’s growth rate,” it said.

Commerce and Industry Minister Piyush Goyal said critics were comparing figures from the old and new GDP series even though the base year and methodology had changed.

“I see on TV some of the opposition leaders, even possibly a former finance secretary or a former RBI (Reserve Bank of India) governor, both of whom could not complete their tenure in India... They don’t even know [that they should] compare apples with apples. They are trying to misguide the people of India, comparing growth rate [based on an] old series with a new series where the base year itself has changed,” he said.

World Bank executive director Neelkanth Mishra has backed the new series, saying it “cleaned up the data and also significantly improved the methodology”, improving the credibility of the estimates.

India’s growth may lose some steam

Fitch, Moody's and S&P may be raising their forecasts, but none is saying that India's 7.8% quarterly growth rate will simply continue.

Fitch expects momentum to moderate during the rest of FY27 as weaker monsoon rainfall, inflation and signs of slowing manufacturing and services activity weigh on growth.

DBS Bank is also bracing for a slowdown. Economist Radhika Rao expects growth to lose some steam in the second half as tighter financial conditions, elevated energy prices and unfavourable base effects kick in.

DBS expects India to grow 7.3% for the full year, below the 7.8% pace recorded in FY26.

JPMorgan's Jahangir Aziz has gone further. Speaking to CNBC-TV18, he argued that India's recent growth received a boost from RBI rate cuts, regulatory easing for non-bank lenders, strong credit growth and GST tax cuts.

“India was on a sugar high. That's the reason we had growth there, not because there was a methodological change. Like every sugar high, the sugar high can disappear. So, I would be concerned much more with that than with tariffs,” Aziz told CNBC-TV18.

JPMorgan had actually expected growth of 8%, so the 7.8% number came in below its forecast.

Oil remains another major risk. A prolonged period of crude above $100 a barrel could increase India's import bill, pressure the rupee, push up inflation and eventually hurt household consumption.

Fitch also expects the RBI to raise its policy rate by 25 basis points in October to 5.5%, followed by another increase to 5.75% in early 2027.

So what is so great about the Indian economy?

The strength is visible across several parts of the economy. Consumption grew 7.1% in the June quarter, investment rose 11.9% and manufacturing expanded 9.2%, while services and bank credit remained strong.

Questions over the new GDP series and the 7.8% growth figure remain part of the debate. At the same time, global agencies have turned more optimistic.

Risks from expensive oil, inflation, tariffs and weaker global demand remain. For now, however, the upgrades reflect stronger-than-expected domestic demand and investment despite those pressures.