Strong economic indicators, structural reforms, resilient credit growth and fiscal consolidation support India’s latest GDP numbers, argue Dr. Saurabh Garg and Dr. V. Anantha Nageswaran.
New Delhi : Abhishek Anand, Josh Felman and Arvind Subramanian have questioned how India could have recorded 7.8% economic growth in the April-June 2026 quarter, particularly at a time when the economy was facing an energy shock.
It is a fair question. But the answer, according to Dr. Saurabh Garg and Dr. V. Anantha Nageswaran, has been visible in India’s economic data and the structural reforms undertaken over the past several years.
The Timing of the Energy Shock Matters
The first point to consider is the timing.
The April-June quarter began shortly after the conflict involving Iran, the United States and Israel had peaked. Oil prices surged, putting pressure on India’s economy.
However, the sharpest disruption was concentrated in March and the first few days of April. By May, the pressure had eased considerably, and by June, much of the disruption had passed.
Therefore, the authors argue that a difficult few weeks at the beginning of a three-month quarter should not automatically invalidate the growth figure for the entire quarter.
Multiple Economic Indicators Point to Resilience
Economic activity during the quarter provided several signals of continued strength.
Auto sales increased steadily, bank credit expanded and exports grew, helped in part by a competitive currency.
GST collections also remained strong despite rate cuts, increasing by 8.3% in the year ended recently.
Over the three years to 2025-26, gross GST collections increased by 32%, while nominal GDP grew by 31.9%.
The authors point out that these indicators originate from different sources. GST returns are filed by companies, credit data comes from banks and trade data is generated through India’s ports and customs systems. The Ministry of Statistics and Programme Implementation does not produce these indicators.
The convergence of these independent data points, they argue, provides additional evidence of genuine economic activity.
Structural Reforms Helped the Economy Absorb the Shock
One reason the economy was able to withstand the energy shock was the maturation of several structural reforms at the same time.
Union government capital expenditure has increased by 65% since 2022-23 and is budgeted to rise by another 11.5% this year.
Infrastructure created over the past decade—including roads, ports and power capacity—continues to support economic activity even when energy prices rise.
The expansion of digital public infrastructure has also brought a significant portion of informal economic activity into the formal and measurable economy.
Meanwhile, the Insolvency and Bankruptcy Code (IBC) changed the way banks and companies deal with stressed assets and bad debt. Reforms in the real estate sector have also addressed problems associated with stalled projects and opaque financial practices.
Government Absorbed Much of the Oil Shock
The authors also point to the government’s response to the surge in oil prices.
Rather than passing the entire increase in energy costs on to households and businesses, the government absorbed a significant portion of the impact.
According to the authors, this was possible because India had created fiscal space over the years.
A significant external assessment came on September 2, when the Japan Credit Rating Agency (JCR) raised India’s sovereign rating from BBB+ to A- with a stable outlook and raised the country ceiling to A.
The authors note that India had not held an ‘A’ rating for more than three decades.
The rating agency cited factors including India’s digital public infrastructure, GST reforms, the Insolvency and Bankruptcy Code and the decline in the gross non-performing loan ratio to 1.8%.
It also noted that the Centre reduced its fiscal deficit from 4.7% of GDP in FY25 to 4.4% in FY26, while maintaining high capital expenditure.
The authors argue that an international rating agency based in Tokyo has little reason to favour policymakers in New Delhi, making its assessment of India’s reforms an important external indicator.
Growth Drivers Can Change From One Period to Another
The central criticism addressed by the authors concerns India’s earlier growth performance.
If indicators such as credit growth, tax collections and formalisation support the current 7.8% growth figure, they ask, why did similar growth rates in earlier years occur alongside apparently weaker indicators?
The authors argue that this assumes economic growth must always be driven by the same factors.
It does not.
A quarter driven by exports and formal credit will look different from a period in which growth is driven primarily by household consumption or public investment.
The authors point out that earlier years had their own visible growth drivers.
Up to 2024-25, the stock market performed strongly and the number of Indians participating in financial markets increased significantly.
Household net financial savings rose by more than 60% between 2022-23 and 2024-25.
Non-bank and technology-enabled lenders also expanded rapidly. Total resource flows to the commercial sector increased by 72% over three years, while the non-bank share increased by 96%.
These, the authors argue, were genuine economic growth drivers, even though they differed from those supporting growth today.
MSME Credit Continues to Expand
The performance of credit to micro, small and medium enterprises (MSMEs) provides another important indicator.
Outstanding credit to MSMEs increased by 66.6% between March 2023 and March 2026. Even in July 2026, credit was still growing at close to 25%.
The authors note that small businesses are often considered among those most vulnerable to an energy shock. Yet credit to the sector has continued to expand at a substantial pace.
They argue that lenders are unlikely to extend credit on such a scale to businesses they broadly expect to fail.
Questions Over Official Statistics
The article also addresses the suggestion that India’s official statistical system may be producing numbers favourable to the government.
The authors argue that the record does not support this claim.
For 2023-24, the Ministry of Statistics and Programme Implementation revised the growth estimate from 9.2% under the old series to 7.3% under the new series.
That represents a reduction of nearly two percentage points.
The authors say the arithmetic points in the opposite direction elsewhere as well.
For 2024-25, nominal GDP growth under the new series was 9.4%, compared with 9.8% under the old series, even though real growth increased.
Nominal GDP is particularly important because it forms the basis for the government’s fiscal targets.
According to the authors, if the statistical system were simply designed to make the government look better, it would be difficult to explain why nominal GDP—the number most relevant to fiscal calculations—was revised downward.
What the New GDP Series Shows
The authors also compare growth rates under the old and new GDP series.
Across 2024-25 and 2025-26, average real growth under the new series rises from 7.0% to 7.5%.
However, over the three-year period from 2023-24 to 2025-26, average growth under the new series is actually lower than under the old series—7.4% compared with 7.7%.
The authors argue that these comparisons weaken the claim that the revised statistical framework was designed simply to present a more favourable picture of India’s economic performance.
A Broader Look at the Data Is Needed
The authors conclude that economic growth should not be judged by selecting only a handful of indicators.
Household savings, credit growth, resource flows, tax collections and the widening investor base all provide evidence about different parts of the economy.
Looking at only a few indicators can make India’s earlier growth performance appear weaker. Examining the broader set of indicators presents a considerably more complete picture.
India, the authors argue, absorbed a significant energy shock and continued to grow on the foundation of infrastructure built over the past decade, structural reforms and the fiscal space created through improved public finances.
The 7.8% growth figure, they contend, should therefore be viewed as an outcome of underlying economic capacity and resilience—not simply as a statistical artefact.
Authors: Dr. Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation, Government of India; and Dr. V. Anantha Nageswaran, Chief Economic Adviser to the Government of India.
