The past week presented a complex tapestry of economic data for India, featuring a surprisingly strong GDP print, moderating tax revenues, a significant surge in foreign investment, and a worrying slowdown in factory output. These figures, when viewed together, paint a picture of an economy with robust headline growth but underlying sectoral challenges that demand attention.
GDP Growth Puzzles Experts Amid Data Quality Debate
India's economy expanded by a remarkable 8.2% in the July-September quarter (Q2 FY26), significantly outperforming analyst expectations which ranged between 7% and 7.7%. This strong performance, however, arrives amidst ongoing scrutiny over the quality of India's national accounts data. The International Monetary Fund (IMF) has previously assigned a 'C' rating to India's data quality, indicating room for improvement.
Economists have consistently pointed to issues such as high discrepancies between different methods of calculating GDP and a lack of clarity on the deflators used. A Mint analysis of the Q2 data revealed that nearly half of the reported growth stemmed from these statistical discrepancies—the mismatch between estimates from the production and expenditure approaches. In a move that may address these concerns, the statistics ministry is slated to release a new data series in February 2026.
GST Collections Feel the Pinch of Rate Cuts
The full revenue impact of the goods and services tax (GST) rate reductions, effective from 22 September, became evident in the collections for November, which reflect sales made in October. After removing the largely withdrawn compensation cess component, the gross GST mop-up saw a modest year-on-year increase of just 0.7%. Including the cess, collections actually declined by 4%.
While this moderation was anticipated following the rate cuts, government officials point to a silver lining: a potential consumption boost. The taxable value of supplies under GST grew by 15% in September-October, a sharp rise from the 8.6% growth seen a year ago, suggesting that lower tax rates may be stimulating economic activity and could help offset revenue losses over time.
FDI Inflows Defy Trade Tensions, IIP Slows Sharply
On the investment front, India witnessed robust foreign direct investment (FDI) inflows. Equity FDI grew by 19.7% year-on-year to $36.2 billion in the April-September period of FY26. A standout contributor was the United States, whose FDI flows into India surged by a staggering 157% to $6.6 billion in the same period. This figure has already surpassed the full-year inflows from the US in each of the past three financial years (FY23-FY25), making America the second-largest contributor to India's equity FDI after Singapore.
Contrasting this positive news, industrial activity lost considerable momentum. The Index of Industrial Production (IIP) growth slowed to a 14-month low of 0.4% in October, down from 4.6% in September. The manufacturing sector, which holds a 78% weight in the IIP, saw its growth decelerate to 1.8% from 5.6%. Mining output contracted further to -1.8%, and electricity generation slipped into negative territory with a 6.9% drop.
Other Key Developments in Numbers
Beyond the major headlines, several other significant financial developments occurred. The government sought Parliament's approval for ₹41,455 crore in net extra spending for the current fiscal year, though this is not expected to alter the fiscal deficit target due to savings elsewhere. The Indian rupee breached the psychological mark of 90 against the US dollar, pressured by foreign investor outflows and a high trade deficit.
In corporate deals, the Xander Group sold an office building in Bengaluru for ₹852 crore to Embassy Office Parks Reit. Tata Communications acquired a 51% stake in Commotion Inc. for ₹227 crore to bolster its AI-powered customer interaction suite. Globally, chipmaker Nvidia made a $2 billion investment in Synopsys Inc. as part of a broader engineering partnership.
For skilled Indian workers eyeing opportunities abroad, a new bill in the US House of Representatives, the HIRE Act, reintroduced by Democrat Raja Krishnamoorthi, proposes to double the H-1B visa cap from 65,000 to 130,000. This offers a glimmer of hope amid generally tightening US immigration policies, especially since Indians receive over 70% of all H-1B visa approvals.
