India's economy soared to a six-quarter high of 8.2 per cent real GDP growth in the second quarter of FY 2025-26, outpacing global peers and raising hopes of sustained economic momentum. This sounds great. In fact, it makes for one of those "inspiring" WhatsApp forwards. However, beneath this headline lies a rather intriguing phenomenon: prices barely moved.
The Consumer Price Index (CPI) inflation collapsed to a historic low of 0.25 per cent in October 2025—the lowest ever recorded in the current data series. This raises a question: Is India experiencing genuine consumption-led growth or something more complex?
For this, let us take a look at the numbers.
Government data painted a very bullish picture of "broad-based" growth. However, when you look at nominal GDP (at 8.7 per cent) and real GDP (at 8.2 per cent), the divergence is unusually narrow, just 0.5 per cent. Typically, inflation creates a gap of 3-4 per cent.
But 0.5 per cent means economy-wide inflation is practically non-existent, and that, is quite rare for a developing economy like India.
Are we in a surplus economy?
While the economy expanded faster, manufacturing output (measured by the Index of Industrial Production (IIP)) grew at just 4.8 per cent in September 2025. This, put in simpler terms, meant that companies were squeezing higher profits from each unit sold rather than ramping up production volumes.
With wholesale prices falling by 1.21 per cent and food items costing 5.02 per cent less than a year ago, input costs have plummeted. This gap could happen due to many things, one of them being businesses allegedly pocketing the savings instead of passing them to consumers.
The root of the inflation collapse lies in an agriculture-driven surplus. Vegetable prices crashed 27.6 per cent year-on-year, and food items across the board, like cereals, oils, and eggs, have all become cheaper. The government's champion move, the GST rate cuts, which cut levies on everyday goods to boost consumption, might have amplified this deflationary pressure.
Lower prices sound good, but economists have always warned that sustained price decline could deter spending, as consumers delay purchases, hoping for further discounts.
Tackling Trump tariffs
Export growth, too, warrants a similar critical approach. Merchandise and services exports rose 4.84 per cent in April-October 2025, with strong demand from the US at 10.15 per cent. This is the latest government data.
Yet industry analysis reveals this spike was partly driven by "front-loading", exporters rushing shipments before anticipated American tariff hikes took effect. Once these orders are fulfilled, export momentum could falter.
Jobs and economic growth
Another part that the government data highlighted was the labour market. While the Labour Force Participation Rate (LFPR) reached a six-month high of 55.4 per cent in October 2025, this could also likely hint at rural distress rather than economic exuberance. More family members, particularly women, might be seeking work out of necessity, not opportunity.
India's GST collections of Rs 1.96 lakh crore in October grew just 4.6 per cent, lagging nominal GDP growth of 8.7 per cent. Tax revenues typically expand faster than the overall economy; this slowdown indicates that the GST rate cuts might have temporarily sacrificed revenue without yet boosting volumes enough to compensate. Even the RBI maintained its repo rate at 5.50 per cent with a neutral stance, signalling confidence in price stability.
Yet, for us ordinary Indians, GDP numbers only make great headlines and WhatsApp forwards. Economic growth is much more than that: it's whether jobs are secure, incomes are rising, and prices stay within reach.