8.2% growth is good. Now read fine print

Fast growth does not equal strong foundations; the IMF’s Grade C is a reminder.

India’s latest GDP figures position the economy to be producing at a significantly higher level than last year, emphasised by the Rs 48.63 lakh-crore output projected to be realised in a single quarter.

An 8.2% GDP increase indicates
that this rise is part of a genuine momentum rather than merely a post-pandemic bounce.

The increase in real GVA from Rs 82.88 lakh-crore to Rs 89.41 lakh-crore further indicates that agriculture, industry, and services are experiencing genuine rise in value added and not just rise in prices.

The real numbers hold up because the nominal GDP increased by 8.8%, demonstrating that the inflation remained under check. Private Final Consumption Expenditure rising by 7.9% show that households are spending more. Agriculture’s 3.5% growth, supported by fuller reservoirs and better horticulture output, points to a small but real improvement in rural incomes.

These figures make the Indian economy appear to look like it is moving forward even as much of the world is eclipsed in greater economic uncertainty. However, every headline has its shadow. Here, this shadow appears in form of a shocker when the IMF announced that India has been assigned a ‘Grade C’ in its recent assessment on its national income accounting.

There are multiple shortcomings highlighted by the IMF team which require careful consideration: ‘a) Use of an outdated base year (2011/12); b) Use of wholesale price indices as data sources for deflators due to the lack of producer prices indices; c) Excessive use of single deflation, which may introduce cyclical biases; d) Sizeable discrepancies between production and expenditure approaches that may indicate the need to enhance the coverage of the expenditure approach data and the informal sector; e) Lack of seasonally adjusted data and room for improvement of other statistical techniques used in the quarterly national accounts compilation, and a Lack of consolidated data on states and local bodies after 2019’.

How can India possibly be underrated when it’s racing at 8% while the world limps at 3%? The truth lives in the footnotes. The RBI’s Annual Report (2024-2025) recognises that the economy has performed well, but it also quietly lays out the structural issues that still drag down India’s credibility.

Inflation, which had been high for much of the previous years, finally eased, and even slipped below target toward the end of 2024-2025. Banks experienced significant credit growth and could lend with a clean balance sheet, maintaining capital buffers which are far more than regulatory requirements.

On the Budget front, the Centre stuck to the path of consolidation with the help of strong GST and direct tax collections, and successfully managed to keep the spending mix relatively high-quality. 

Countries with discretionary exercises in projecting the good alone in numbers have two narratives: the one they tell the world, and the other they only whisper. India’s 8.2% is the story its government wants to tell the world. The IMF’s C is the whisper.

An economy appearing to grow fast is not the same thing as an economy growing well.
What the IMF is saying that India’s institutional bones are not yet as strong as its muscle.

Mining output was hit by an unusually long monsoon, while electricity generation slowed because of a milder-than-usual winter that reduced heating and peak-load demand. Although these might seem like fleeting weather phenomena, they significantly undermined the industrial base of the year.

The unevenness is evident even in this strong quarter. Electricity and utilities grew only 4.4%, and mining barely moved at 0.04%. These are the backbone sectors and subsequently their sluggishness signals that the recovery is not evenly spread across the real economy. According to nominal GVA, the primary sector accounted for 14%, the secondary sector for 26%, and the tertiary sector for 60% in Q2.

These proportions look normal for a service-led economy, but India’s case is different because its employment structure does not match its output structure: too many Indians still work in agriculture and low-wage services, sectors that contribute little to productivity gains.

The RBI cautions that India’s export trajectory will continue to be impacted by growing trade protectionism, tariff uncertainty, and geopolitical tensions. Services exports and remittances help cushion the current account, but they cannot substitute for a diversified and scaled-up goods export engine — one that India still lacks. Another contradiction shows up in the financial markets. The rupee looked stable from a distance, but underneath, it was constantly being pushed down by a strong US dollar and the usual swings in foreign capital.

When one realises that the IMF is grading the architecture that supports India’s growth rather than its growth rate, its Grade C makes sense. A country can grow at 8% and still have structural vulnerabilities.

It can post healthy GVA numbers and still have weak institutional capacity at the state level, low labour productivity, and an export profile mismatched with global demand. The GDP captures the pace of economic activity; it does not capture the quality of governance that sustains it.

The true conflict is that, despite India’s robust short-term economic momentum, its long-term framework is still being developed.

Even with the strong Q2 performance, broad-sector analysis shows agriculture growing only 3.5%, utilities at 4.4%, and mining barely above zero, sectors that collectively employ millions but contribute less and less to value creation.

This does not diminish the achievement of 8.2% growth. However, it makes the narrative more difficult. The IMF’s C serves as a subtle reminder to see past the quarterly glow and recognise the unresolved issues in economic structure, finance, and governance. India is leading the way. What it needs now is the depth.

(Deepanshu is professor and dean, OP Jindal Global University, and director, Centre for New Economics Studies (CNES). Geetaali is research analyst, CNES).

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH).