📰GDP Growth Hits 8.2 Percent, But Can We Trust It? | Daily India Briefing

Today, we breakdown India’s economy hitting an annualized growth rate of 8.2 percent in the most recent quarter, and if the headline GDP figure reflects the economic reality.

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Macro

• The rupee is getting closer to 90 with each passing day. Delays in finalizing an intermediate trade accord have caused the rupee to continue to sell-off. Economists also point to the current account as a sign of the supply-demand imbalance, since importers have to buy dollars while exporters are not receiving enough rupees back. 

• The strong quarterly GDP hides reliance on public-spending construction.While government expenditure has contracted, most contracts in the infra space are still government ones. The IMF also assigned India a C on its national accounts from an A-D scale.

Equities

• Swiggy plans $1.1 billion (₹98.7 billion) through a QIP share sale. The qualified institutional placement will raise more from institutional investors after its November 2024 IPO. 

• Torrent Gas hires 3 banks for a $450 million (₹40.4 billion) IPO. The city-gas distributor would be valued at $3 billion (₹269.1 billion) in a test for industrial companies. Distributors have been scaling operations recently to meet the government’s push for cleaner fuels. 

• Sourcing companies are being watched for new deals. E-commerce players are tweaking cost structures and turning more to internal sourcing. Logistics companies like Delhivery are being phased out as commerce players can save 1 to 11 percent by internal sourcing. 

• The FDA is accepting Wockhardt's novel drug in a much needed Pharma boost.The acceptance starts to move India’s pharma industry from a generics-led to novel medicine.

Alts

• Rising pet ownership has Reliance Industries and others launching new brands. Reliance is a new entrant but is charging half the price that most other brands do for pet foods. The aim is to take market share before increasing prices in line to competitors. Pet food is worth $2.4 billion (₹215.3 billion) and is expected to be $4.6 billion (₹412.6 billion) by 2033. 

• Carlyle is eyeing a $300 million (₹26.9 billion) stake in a housing finance firm.Nido is a home mortgage firm though negotiations are still ongoing. Carlyle would join fellow PE giants Blackstone and SMFG in betting on the Indian housing market growing.

Policy

• Former RBI Governor Rajan is warning about excess global liquidity in private credit. Ample credit and global banks cutting rates have led to a frothy environment; his main concern is that bubbles tend to rise in times of lower rates and free-flowing credit. The global private credit market is over $1.7 trillion (₹152.5 trillion). 

• Agencies are raising efficiency requirements for solar modules to 21 percent from 20 percent.The efficiency percent stands for the amount of sunlight converted to power. The goal is to curtail a supply glut of less efficient modules.

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GDP Growth Hits 8.2 Percent. Can We Trust It?

India’s real GDP grew at an annual rate of 8.2 percent during the quarter ending September, crossing the remarkable 7.8 percent from the previous quarter, as per the Indian government’s data release. Growth jumped largely because factories, construction sites, and consumers all came alive at the same time. The government also noted that financial, real estate, and professional services kept up a strong pace, expanding 10.2% between July and September.

The impressive growth comes despite the U.S. putting 50 percent tariffs on Indian imports, among the highest tariffs it put on any country, effectively blocking Indian companies from selling to Americans.

Still, there are concerning signs that the headline GDP growth is disconnected from the economic reality. Core GDP growth slowed to a nine-quarter low of 4.1 percent, signalling that unexplained residual factors inflate headline growth figures. Core GDP strips out volatile elements of GDP like net exports and government spending, allowing it to primarily reflect domestic consumption and investment. If private investment is stagnant or declining in real terms, government fiscal stimulus is likely masking a deeper structural issue. Corporate sales growth averaged just 5%, well below nominal GDP at 8.7%. That figure is also a signal consistent with weak private investment and demand.

However, positive outlooks remain. Since being iced out by the U.S., India has secured generous trade agreements with the United Kingdom in July, two European trade deals, and eased relations with Russia and China. The country also cut goods and services taxes (GST), effective September 22, to boost domestic consumption. The GST cut and trade deals with the west kicked in during the fall, meaning their full impact likely was not reflected in the most recent quarter’s GDP growth data, setting positive expectations for the current quarter’s figure.

Concerns about the quality of India’s economic data persist. The IMF gave India’s government a “C” on reliability of its GDP data, earning the same grade as last year, though the country has a “B” on all other economic data collections. The lower score is largely attributable to India’s large informal sector: about 90 percent of Indians are employed under informal agreements, with just 10 to 20 percent earning a consistent salary, and only roughly 2.2 percent of Indians pay income tax. This means there are few official sources the government can survey to accurately estimate the total income of the 643 million employed workers. The IMF’s own economic growth projection for India is less optimistic, projecting India will grow 6.6 percent in FY2026 (year-ending March 1, 2026).

See you tomorrow.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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