Core Viewpoint - India's GDP growth of 7.8% for the April to June quarter is seen as potentially overstated due to statistical factors, particularly a low deflator impacting the real economic growth assessment [1][4][5] Economic Growth Data - The reported GDP growth of 7.8% significantly exceeds economists' median forecast of 6.7% [1] - Analysts from Goldman Sachs, HSBC, and Nomura have raised their full-year growth forecasts for India despite concerns over data accuracy [2][6] Deflator and Inflation Adjustment - The GDP deflator used in India is closely tied to the Wholesale Price Index (WPI), while the Consumer Price Index (CPI) is the primary inflation target for the Reserve Bank of India [3] - A negative WPI since May has led to an unusually low GDP deflator, artificially inflating the reported economic growth rate [4] Forecast Adjustments - Nomura has revised its growth forecast for the fiscal year from 6% to 6.6%, while Goldman Sachs increased its estimate from 6.1% to 6.7% [6][7] - Despite these upward adjustments, analysts caution that the GDP data does not signal strong underlying demand [7] External Economic Pressures - The U.S. has announced a 50% tariff on Indian goods, effective August 27, which is expected to impact economic performance in subsequent months [7][8] - Goldman Sachs estimates that these tariffs could reduce India's annual GDP by 0.9 percentage points, translating to an additional drag of about 20 basis points on actual growth for the remainder of the year [8][9]

Group 1 - India's economy showed a strong growth of 7.8% year-on-year for the April to June quarter, surpassing economists' median forecast of 6.7% [1] - Analysts from Goldman Sachs, HSBC, and Nomura expressed concerns that a lower deflator may have inflated the growth figures, not accurately reflecting the true economic fundamentals [1][2] - Despite the concerns, market sentiment was boosted, with the Nifty benchmark index rising by 0.8% on the day following the data release [1] Group 2 - The GDP deflator used in India is closely related to the Wholesale Price Index (WPI), which has turned negative since May, leading to an artificially low deflator and potentially overstating GDP growth [2] - Goldman Sachs economist Santanu Sengupta suggested that using a corrected deflator could lower GDP data by 50 basis points, while HSBC's Pranjul Bhandari estimated the exaggeration could be as high as one percentage point [2] Group 3 - Several institutions have raised their annual growth forecasts for India, with Nomura increasing its estimate from 6% to 6.6% and Goldman Sachs from 6.1% to 6.7% [3] - Analysts caution that these upward revisions do not indicate a positive outlook on the economic fundamentals, as the growth is influenced by a low deflator and preemptive shipments to the U.S. due to tariff concerns [3] - The external challenge of a 50% tariff on Indian goods imposed by the U.S. is expected to impact economic data in the following months, with Goldman Sachs estimating a potential reduction of 0.9 percentage points in annual GDP [3]