India’s 7.8% GDP Growth: Jobs, Inflation and the Reality Behind the Numbers

KAKALI DAS

India’s economy has grown by 7.8 percent in the April to June quarter, and that is a remarkably strong number. It is much higher than what many economists had expected. A Reuters poll had estimated growth at around 7.1 percent, while the Reserve Bank of India had expected it to be around 7 percent. India has finally delivered a growth rate of 7.8 percent.

This becomes even more interesting when we look at the difficult conditions in which this growth has happened. There has been conflict involving Iran, oil prices have remained high, shipping has faced disruptions and there has been uncertainty across the global economy. Many expected the April to June quarter to be difficult for India. Instead, the economy has produced a number that has made economists and observers take notice.

So, how did India manage to grow so strongly?

India’s 7.8% GDP Growth: Jobs, Inflation and the Reality Behind the Numbers

The answer can be found in several parts of the economy. Manufacturing grew by more than 9 percent. Investment grew by almost 12 percent. Financial, real estate and professional services grew by more than 12 percent. Consumption grew by about 7.1 percent. Taken together, these numbers show that there is considerable strength in the Indian economy.

However, there is another side to this story. A strong GDP number does not automatically mean that every Indian is doing well. Alongside the good news, there are serious concerns about unemployment, food prices, inequality, agriculture, household borrowing, oil prices and the rupee.

GDP essentially tells us the value of everything an economy produces. This includes cars, software, construction, banking services, steel, hotels, agriculture, telecommunications, healthcare and professional services. When we say that India’s GDP grew by 7.8 percent in the April to June quarter, it means that the country produced 7.8 percent more economic output than it did during the same period a year earlier.

One of the strongest parts of this growth story is investment. Gross fixed capital formation, despite being a complicated sounding term, is an extremely important measure. It tells us how much a country is investing in creating assets that can support future economic activity. These assets can include factories, roads, railways, power plants, warehouses, commercial buildings, airports and data centres.

Investment in this area grew by almost 12 percent. This matters because there is an important difference between an economy growing because people are spending more today and an economy growing because companies and governments are building productive capacity for tomorrow.

When people spend more, businesses can sell more goods and services. But when factories, roads, power plants and other infrastructure are built, they can support economic activity for many years. Investment can therefore create the foundation for future growth.

Government infrastructure spending has also played a major role. The central government had budgeted about Rs 12.2 lakh crore for capital expenditure during the financial year. Nearly 30 percent of that amount was spent during the April to June quarter, amounting to around Rs 3.4 lakh crore.

Government spending on infrastructure does more than simply create roads, railways and other public assets. It also creates demand for steel, cement, machinery, engineering services, transportation, construction and labour. When the government spends money on infrastructure, many different parts of the economy benefit from that spending.

This is particularly important when private demand is weak. Government investment can help keep economic activity moving while also creating assets that can improve productivity in the future.

Another encouraging sign is that private companies appear to be joining the investment cycle. For a long time, economists had been asking when private sector capital expenditure would begin to increase. There had been concerns that companies were not investing enough even after receiving tax benefits.

That situation now appears to be changing. Companies are investing in areas such as data centres, power and metals. Corporate borrowing has also increased significantly. Corporate credit growth is running at around 20 percent year on year.

Companies usually borrow more when they are expanding, increasing production or investing in new capacity. Therefore, stronger corporate borrowing, combined with higher investment, can be a positive sign for the economy.

Corporate profits are also showing strength. Companies included in the Nifty 50 reported average profit growth of around 18 percent in the June quarter. This was reportedly the strongest profit growth in ten consecutive quarters.

So, three important things are happening at the same time. Investment is rising, corporate borrowing is rising and corporate profits are rising. Together, they suggest that a part of the Indian corporate sector is becoming more confident about future economic growth.

Manufacturing is another major reason for optimism. Manufacturing grew by 9.2 percent compared with the same quarter of the previous year. This is important because manufacturing has a much wider impact on employment and supporting industries.

Agriculture provides employment to a very large part of India’s workforce, but manufacturing is also extremely important because it creates jobs across many different areas. A manufacturing factory does not employ only people working on the production line. It also creates demand for engineers, technicians, drivers, warehouse workers, suppliers, logistics companies and many other services.

A growing manufacturing sector can therefore have a much wider impact than the value of the goods it produces. Strong manufacturing growth is consequently an encouraging sign for India.

Financial and business services have also performed strongly. Financial, real estate and professional services grew by more than 12 percent, compared with around 8.8 percent a year earlier.

Credit growth across different sectors has also been strong, at around 18 percent. Banks are lending significantly more than they were during the same quarter of the previous year. This reflects stronger borrowing by both businesses and households.

People are also spending more. Consumption grew by about 7.1 percent, which is important because consumption accounts for roughly three fifths of the Indian economy.

People spending money on restaurants, phones, holidays, clothes, vehicles, household appliances and other goods and services supports economic activity. A strong consumption number therefore provides another reason to be positive about the economy.

But this is where the story becomes more complicated.

A 7.8 percent GDP growth rate does not mean that all the problems in the Indian economy have disappeared. The biggest concern is employment.

India can grow quickly without creating enough good jobs. That is exactly the problem that needs closer attention.

The unemployment rate during the April to June quarter was around 5.4 percent. In urban India, it was higher at around 6.7 percent. Youth unemployment was even more worrying, at around 15.9 percent. It had been about 15 percent in the previous quarter and around 14.6 percent a year earlier.

That means unemployment among young Indians has been rising.

This is particularly important for a country like India, where a large part of the population is young. India spends years providing nutrition, schooling and higher education to young people. Families and the country invest heavily in preparing them for the workforce.

If young people reach working age but cannot find employment, that investment does not produce the economic return that the country needs.

The labour force participation rate has also fallen. It was around 54 percent during the April to June quarter, compared with about 55 percent in the previous quarter. This suggests that while the economy is growing, the growth is not creating enough employment opportunities for everyone who needs them.

This is why the quality of economic growth matters just as much as the speed of growth.

Another concern is food inflation. Headline inflation may appear relatively moderate, but averages can hide what is happening inside an ordinary household budget.

Food prices matter greatly because food takes up a large part of household spending, particularly for poorer families. According to the Indian Household Consumption Expenditure Survey, food accounts for around 47 percent of monthly consumption expenditure for the average Indian household. In urban India, the share is around 40 percent.

When the price of basic food increases, poorer families feel the impact first.

Egg prices, for example, have risen sharply, reaching increases of around 40 percent in a year in some cases. Retail egg prices have reached around Rs 14 per piece on some platforms. Milk prices have also increased, with prices in Mumbai rising by around Rs 9 per litre and moving above Rs 100 in some cases.

Chicken prices have touched around Rs 300 per kilogram in some markets. Vegetables such as okra and ridge gourd have also become significantly more expensive in some places, with prices reportedly rising from around Rs 30 to Rs 60 per kilogram.

There are several reasons behind these increases. Weather conditions have been uneven, fuel prices remain high and transportation costs affect everything that moves from farms and mandis to cities. Higher fuel costs can therefore eventually appear in food prices.

There is also the issue of maize and sugar being diverted towards ethanol production. Maize is used as animal feed, so changes in its availability can affect poultry costs and eventually increase the price of chicken and eggs.

All of these increases eventually reach the same place: the household grocery bill.

This creates a difficult situation. India is recording strong economic growth, but many households are not necessarily feeling that growth in their monthly budgets. In fact, they may be feeling the opposite because everyday expenses are becoming more expensive.

Inequality makes this problem even more serious.

When prices rise, the impact is not the same for everyone. A higher food bill may be inconvenient for a wealthy household, but it can be devastating for a poor household.

India has a very large difference in consumption between its richest and poorest households. In urban India, the average monthly per capita consumption of the bottom 5 percent has been estimated at around Rs 2,300, while for the top 5 percent it is around Rs 20,300. That represents a difference of almost eight times.

There is also a wider wealth gap. Estimates have suggested that the richest 1 percent of Indians receive around 23 percent of total income and own about 40 percent of total wealth, while the bottom 50 percent own only around 6 percent of wealth.

GDP tells us how quickly the economy is growing. It does not tell us how the benefits of that growth are distributed.

This is one of the biggest questions India must address. A country can have impressive GDP growth while large sections of its population continue to struggle with unemployment, rising living costs and limited access to economic opportunities.

There is another concern that deserves attention: consumption is growing strongly, but credit is growing even faster.

Consumption has increased by around 7.1 percent, while credit growth has been around 18 percent. This means some of the spending we are celebrating may be supported by borrowing.

Borrowing is not necessarily bad. Loans can help people buy homes and vehicles, and businesses can use credit to expand. But if households increasingly depend on credit cards, personal loans and other forms of borrowing to pay for everyday consumption, it can become a problem.

People may be spending money today that they will have to earn tomorrow.

If incomes do not increase sufficiently in the future, households can find themselves under financial pressure because of loan repayments and interest costs.

The agricultural sector presents another challenge. While the economy as a whole grew by 7.8 percent, agriculture grew by only around 3.6 percent.

This matters because around 40 percent of Indian workers depend on agriculture. A large part of the rural economy is still closely connected to the monsoon.

Rainfall has therefore become an important factor to watch. If monsoon conditions remain weak or uneven, agricultural incomes can come under pressure. That can then affect rural consumption, food prices and employment.

Finally, there is the issue of oil and the rupee.

India imports around 90 percent of its crude oil requirements. This makes the country highly exposed to changes in global oil prices. When crude becomes more expensive, India’s import bill rises. Higher oil prices can also increase transportation and production costs across the economy.

The rupee is another important factor. A weaker rupee makes imported goods more expensive, including crude oil. It can therefore add further pressure to household expenses and business costs.

At around Rs 95 to the dollar, the rupee is at a level that deserves attention. A weaker currency can also affect investor sentiment and make some imports more expensive.

So, what should we make of India’s 7.8 percent GDP growth?

The number is genuinely impressive. India has grown faster than many expected despite a difficult global environment. Manufacturing is strong. Investment is rising. Infrastructure spending is high. Corporate profits are growing. Financial services are performing well. Consumption remains strong.

These are all important reasons to celebrate.

But India should not stop at celebrating the headline number.

The real challenge is to ensure that economic growth reaches ordinary households. Growth needs to create jobs, particularly for young people. It needs to raise incomes rather than simply increase consumption through borrowing. It needs to support agriculture and rural communities. It needs to keep food prices under control. It needs to reduce the pressure of inequality and ensure that the benefits of economic expansion are distributed more widely.

A strong GDP number tells us that the Indian economy is moving fast. The next question is whether it is moving in a direction that benefits enough people.

India has demonstrated that it can grow at an impressive pace. Now it must demonstrate that it can turn that growth into better jobs, stronger household incomes and a better quality of life.

That is the real test.

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The 7.8 percent figure is therefore both good news and a reminder. It shows that the Indian economy has considerable strength, but it also shows why GDP alone cannot tell the entire story.

The economy may be growing strongly. Manufacturing may be booming. Companies may be investing. Banks may be lending. Consumers may be spending.

But if young Indians cannot find jobs, if food prices continue to rise, if households increasingly depend on loans, if agriculture remains weak and if inequality continues to widen, then the headline number will not tell us how the average Indian is actually living.

India needs growth, but it needs growth that works for people.

That is the larger story behind the 7.8 percent GDP number.

References

Ministry of Statistics and Programme Implementation (MoSPI), Government of India. Quarterly Estimates of Gross Domestic Product for the First Quarter (April to June) of 2026–27. 31 August 2026.
Ministry of Statistics and Programme Implementation (MoSPI), Government of India. Additional Information Related to GDP Estimates Received After Release of Q1 Estimates of FY 2026–27. 2 September 2026.
Ministry of Statistics and Programme Implementation (MoSPI), Government of India. National Accounts Statistics 2026. 31 August 2026.
Ministry of Statistics and Programme Implementation (MoSPI), Government of India. Periodic Labour Force Survey: Quarterly Bulletin, April to June 2026. 10 August 2026.
Ministry of Statistics and Programme Implementation (MoSPI), Government of India. Household Consumption Expenditure Survey 2023–24: Fact Sheet. The survey reports that food accounted for 47.04% of rural MPCE and 39.68% of urban MPCE.
Ministry of Statistics and Programme Implementation (MoSPI), Government of India. Household Consumption Expenditure Survey 2023–24, Report No. 592.

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