Parsa Venkateshwar Rao Jr | Impressive GDP Growth Lifts Modi Govt’s Spirits, but Questions Remain

The estimated GDP figure of 8.2 per cent for the second quarter of the 2025-26 fiscal year has lifted the spirits of the Narendra Modi government, now into its third term in office. It is 8.2 per cent compared to 5.6 per cent for the second quarter in the preceding fiscal of 2024-25. It’s an impressive jump, at least on paper. It’s a slightly different story when 8.2 per cent is compared to 7.8 per cent growth in Quarter 1. But governments, political leaders and parties who head the government have a right to pat their backs for the slightest improvement in figures. The first half of fiscal 2025-26 now stands at 8.0 per cent, with chief economic adviser V. Anantha Nageswaran looking to an annual growth rate of more than 7.0 per cent. It is evident, however, that the growth rate figures from quarter to quarter and year to year are still moving at a snail’s pace. The fault is not entirely with the government. The global economic outlook is not too bright.

A close look at growth factors reveals details that are less robust than they are made out to be. The Index of Industrial Production (IIP) for September 2025 stands at a reasonably good four per cent year on year, with the manufacturing sector expanding by 4.8 per cent. For July 2025, the figures stand at 3.5 per cent and 5.4 per cent, and in August 2025, the figures are 4.0 per cent and 3.8 per cent respectively. Similarly, the breakdown of exports in merchandise reveals an interesting pattern.

Cumulative exports (merchandise plus services) grew by 4.84 per cent in the April-October 2025 period to $491.80 billion. Of this, exports in merchandise showed that marine products contributed 16.18 per cent, meat, dairy and poultry 23.9 per cent, other cereals 25.52 per cent, cashew nuts 28.32 per cent, and electronic goods 37. 82 per cent.

Agriculture, dairy and meat industries are huge contributors, and they are not seen as the star performers they are. It is more than likely that agriculture, dairy and meat will remain key sectors in India’s exports. Ways and means must be found to strengthen and support them.

If the government is doing anything for them on support and investment, it must speak loudly about it instead of focusing only on services, electronic goods and Brahmos missiles. The money transfers to farmers, which the government is so proud of, doesn’t seem to reflect the performance of exports of other cereals and cashew nuts, dairy, meat and poultry. The government seems to fight shy of admitting that there are valuable earnings from the sale of milk and milk products, of meat, including beef, fish, chicken and eggs. BJP leaders in the government may feel this will have a negative impact on their image of vegetarian Hindutva.

There is also a desperate attempt by the government to link the Q2 growth rate to the success of the programmes and schemes of the Modi government in the last 11 years. Finance minister Nirmala Sitharaman says that “public investment” is sustaining growth, which is not a great sign. Private investment continues to be a laggard. It will be argued this is linked to interest rates. It suggests that there is a need for the Reserve Bank to reduce the repo rate and stimulate a credit spurt, in order to revive private participation. Captains of industry expect the RBI to take a calculated risk by letting down the guard to help them out, though they are unwilling to take any risks themselves.

The government boasts that the country is sustaining growth. Of course, they refrain from calling the eight per cent quarterly growth rate and seven per cent annual rate as high growth, as growth with low inflation lacks economic credibility. Conventional wisdom has it that a reasonable rate of inflation is inevitable to sustain a robust economic growth rate. Prime Minister Narendra Modi and finance minister Nirmala Sitharaman are wary of inflation, and that may have helped in a stable economy despite its vulnerabilities. So, India’s economy seems stuck in shallow waters. Talk about AI, about space and nuclear power remains rhetorical as these sectors are not yet at a take-off stage. Their contribution to the economy as of now remains nascent.

While it is the right policy to pursue frontier science areas, the roti-dal bases of the economy are elsewhere -- in agriculture, in intermediary goods and the domestic services sector. Most of the time the service sector is seen only in the context of high-end computer-enabled services. More time, thought and funds must be spent on the domestic services sector. Tourism and hospitality are the most conspicuous parts of the domestic services sector. But there are others. Private individuals, more than private enterprises, are tapping into this through social media. Its potential has not yet been fully gauged.

The International Monetary Fund (IMF) has raised the issue of the reliability of the accuracy of economic data in India. There is enough wiggle room for the government to play around with numbers, without too much distortion. The temptation can be curbed if economic statistics, or statistics of any kind, whether of electoral rolls or population, is made free of government interference. It is a big issue and a political question at that. There is every reason to suspect that the Narendra Modi government is exerting undue influence in the interpretation of numbers, whether with regards to the economy, to electoral rolls or the Census. It is necessary for the Modi government to demonstrate that its hands are off these exercises. It needs to understand the strategic importance of data, but it shows all signs of an authoritarian government which wants to control it.