Thru the optimism prism: GDP’s 7.8% print offers some hope for those willing to see it

India's GDP grew by 7.8% in Q1 FY27. This straightforward announcement, not very different from the number anticipated and predicted by economists at several banks and investment institutions, has made more news and generated more meaningless debate than warranted.

Other than a maverick former civil servant, nobody of consequence has questioned the 7.8% figure. Using the GDP equivalent of cricket's Duckworth-Lewis method, this gentleman has reduced it to 2.6%. Few agree with him. Even other sceptics have brought up what are strictly speaking extraneous issues.

For example, a former RBI governor has pointed to absence of enough jobs. A former CEA has argued the GDP number is at variance with 'felt reality' - without conceding that multiple stakeholders could feel diverse realities at the same time. He has also wondered why the energy and growth shock of the Strait of Hormuz war was relatively low. Still others have asked why the stock market continues to be tepid if GDP growth is, indeed, high.


The critics are certainly approaching this from a political position. None of the former officials quoted is positively inclined towards the Modi government. Each has now become a habitual, all-purpose critic. Nevertheless, the points they are making can easily be harmonised and explained. Many of them are even valid observations. Yet, this in no way takes away from the accuracy of GDP growth data.

It's important to appreciate how India's economy and policymakers are responding to global conditions in a particularly challenging year, and how Indian business is navigating opportunities as it senses them.

• GDP growth has been helped by a consumption spurt that commenced with rationalisation of GST rates in autumn 2025. Happily, it has had a longer impact than expected. It has been complemented by a frontloading of government capex in Q1. The 7.8% growth reflects this.
• It's correct that the US-Israel war on Iran did give rise to fears of a year-long inflation and growth shock. Some damage is undeniable. Resumption of serious hostilities could still take a toll. Even so, India has emerged reasonably unscathed - or, less scathed - due to very nimble energy diplomacy.

Combining forces, MEA and MoPNG have given India among the most widespread energy sourcing landscapes - across crude oil, natural gas and LPG - for about any major economy. This now stretches from the Americas to Africa, the Gulf to Russia. Domestically, finmin's macroeconomic discipline has allowed GoI to absorb some of the incremental energy costs and not pass these on to consumers.

Indeed, as one Western diplomat put it in a private conversation, other governments have watched with 'some envy as your ministers have used political weight to nudge private energy companies and markets', adding, 'It is a capability we in the West no longer have.' Such state leverage over energy trade cannot be a solution for all times to come. In a crisis, it's decidedly useful. Somewhere, this cushioning and its tangential impact have enabled GDP growth as well.

• Exports have held up through a tough period. Following the 2025 US tariff war, India's exporters and commerce ministry have pursued an energetic programme of diversification. Q1 FY27 numbers benefited from this, particularly in sectors such as electronics and mobile phones, engineering goods, and pharma.

It's worth noting these are capital- and tech-intensive industries, with limited labour needs. They are also dependent on component and input imports that are expensive and leave exporters with thin margins. Notwithstanding all that, Q1 headline numbers have been high.

• Can exports contribute more to jobs than they currently do? This is a fair and purposeful question. As big FTAs - EU and Canada at the end of the year; US, too, though the timeline is Washington's self-inflicted mystery - kick in, exports in garments and textiles, agri-products, leather goods, and gems and jewellery will access expanded markets. Inevitably, jobs will rise, partially filling the employment deficit. As such, 2027-28 holds promise.
• The stock market follows a logic of its own. In the past, Sensex has galloped even as the real economy has faltered. Currently, the sequencing seems reversed. But caveats are needed here. Stock markets are a puzzle everywhere. If you remove the US' AI-related stocks (experiencing an unusually lengthy surge) and India's IT stocks (in troubled waters), returns and numbers look much more even.

The lopsided nature of recent international portfolio flows is apparent from north Asian stock markets. In South Korea, two companies - Samsung and SK Hynix, both semiconductor behemoths - have carried an entire boom. A slight exit from there has resulted in FPIs turning net buyers of Indian equities through this summer.

It's a slim change, true, but early signs of hope for those willing to see them. Robust Q1 growth numbers should only encourage this.

The writer is partner, The Asia Group,and chair of its India practice