India’s headline GDP growth surged to 8.2%, far above expectations, but the celebration is tempered by the sharp drop in nominal GDP to 8.7%, raising concerns about pricing power, corporate revenues, and government finances, according to Rajani Sinha, Chief Economist, CareEdge Group.
Sinha told ET Now that while real GDP is impressive, nominal GDP is a more direct indicator of corporate pricing strength and tax revenue potential. “Nominal GDP being so low is concerning because it reflects very weak inflation. Pricing power is low and this will show up in corporate revenues—especially for smaller firms,” she said.
Low inflation could hit government revenues
With CPI inflation at 0.25% and WPI in negative territory, India’s benign inflation environment is starting to weigh on fiscal math.
“Tax collections—both direct and indirect—are already below budgeted levels. Without the RBI dividend windfall, government finances would be under stress,” Sinha added. A slower nominal GDP also mechanically pushes the fiscal deficit ratio higher.IMF’s data critique valid, upgraded GDP methodology coming
Responding to the IMF’s concerns about outdated metrics and the lack of seasonally adjusted data, Sinha said the issues are real and already under review.
Live EventsIndia still uses a 2011–12 GDP base year, despite major shifts in the economy. The revised methodology using a 2022–23 base is expected next year, with greater inclusion of digital datasets, new surveys, and better tracking of the unorganised sector.
“MoSPI is actively updating the methodology—coverage, data sources, and deflation techniques will all be upgraded. The new GDP series should be more robust,” Sinha said.US tariff impact to show up more clearly in October data
With the additional US tariffs kicking in at the end of August, Sinha said the Q2 GDP print only captures one month of impact, and even that was masked by heavy front-loading of exports.
“Exporters and global buyers pre-stocked before tariffs began. That boosted Q2 numbers artificially,” she noted.
While exports to the US have contracted, rerouting via other markets has softened the blow, at least so far.
RBI rate-cut decision: “A very difficult call”
With RBI’s December 5 policy meeting around the corner, Sinha expects a tough balancing act:
Growth is high
Inflation is extremely low
Global uncertainty persists
Despite the strong GDP print, Sinha believes there is still room for a 25 bps rate cut.
“RBI may use this window of low inflation to deliver a shallow cut, anticipating growth moderation in the second half,” she said.