economy · 2026-09-06
India's 7.8% GDP Growth Is a Repeat
Photo: Vyacheslav Argenberg / Wikimedia (CC BY 4.0)
India's economy grew 7.8% in Q1, exactly matching last year's Q1, and last year's 7.8% start slowed to 6.2% by Q4, so the question is whether this Q1 fades the same way.
Why did growth slow each quarter last year?
Mainly a base effect: last year's mining output had jumped 12.4% in Q1, so growth compared against that high starting point looked smaller each following quarter, ending at 6.2% by Q4. Sectors like construction and utilities also cooled from an unusually strong first quarter, meaning the drop reflected weaker year-on-year comparisons, not a sudden loss of underlying momentum.
Why does GDP growth run on year-ago comparisons rather than raw output?
GDP is officially measured as year-on-year change, so each quarter's number depends on how strong or weak the same quarter was a year earlier. That's why last year's Q1 mining spike (12.4%) mechanically dragged down Q4's headline even though actual output kept rising; the same math applies again from this year's Q1 base.
How much room does the Fed actually have to raise rates further?
The Fed's own August meeting had markets pricing a one-in-three chance of a hike, with a 25 basis-point increase fully priced in by September and another by Q1 next year; core inflation was still at 3.05%, versus the 2% target. Whether Warsh follows through, rather than just warning, is what would actually move Indian asset flows.
What could drag this year's growth down too?
Three risks stand out. Oil prices staying high hurts India directly, since it imports over 90% of its crude and buys roughly the same amount regardless of price, so costlier oil drains foreign exchange and stokes inflation. Separately, the US Federal Reserve turning more hawkish makes dollar borrowing costlier and Indian assets less attractive, which could pull foreign money out and pressure the rupee, feeding back into growth.
Why does GDP growth run on year-ago comparisons rather than raw output?
GDP is officially measured as year-on-year change, so each quarter's number depends on how strong or weak the same quarter was a year earlier. That's why last year's Q1 mining spike (12.4%) mechanically dragged down Q4's headline even though actual output kept rising; the same math applies again from this year's Q1 base.
How much room does the Fed actually have to raise rates further?
The Fed's own August meeting had markets pricing a one-in-three chance of a hike, with a 25 basis-point increase fully priced in by September and another by Q1 next year; core inflation was still at 3.05%, versus the 2% target. Whether Warsh follows through, rather than just warning, is what would actually move Indian asset flows.
Source: livemint.com