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9th Anniversary: Free Tote & Mug

India’s GDP may be strong—global inflation, debt and war could change the picture

Prime Minister Narendra Modi’s appeals to postpone gold purchases, avoid foreign travel and conserve fuel do not signal an imminent crisis. They do expose the constraint: India must earn or conserve the dollars needed for essential imports.

Much of India’s economic debate this week has focused on whether the latest GDP numbers are real—or have been flattered by the way inflation has been measured.

According to Ministry of Statistics and Programme Implementation (MoSPI) estimates, the economy grew an impressive 7.8 per cent in the April-June quarter of 2026-2027, against nominal growth of 10.3 per cent. Critics have questioned revisions to the first two quarters of the previous financial year and the deflators used to convert current-price output into ‘real’ growth. The government, meanwhile, has defended its new 2022-2023 base-year series, Producer Price Index, and its use of double deflation. 

But, on a more serious note, this may also be a temporary argument about the rear-view mirror. Regardless of how low or manageable inflation currently appears, the international economy ahead is stumbling across conditions that could produce major inflationary duress.

One does not need a deflator to know that ordinary life has become more expensive, or a professional fund manager to notice that investments have become distinctly moody. Is this a domestic correction or the result of India’s exposure to international markets that remain volatile due to geopolitics? The inconvenient answer is both.

Four shocks, one wave

The post-Covid inflationary pressure could never really settle. Global inflation had remained stable at 2.5 per cent for almost a decade before the pandemic hit and surged to 8 per cent by 2022. Before production and supply chain disruptions could fully settle, military conflicts hit the world. Russia’s invasion of Ukraine—expected to last five days—became a war of attrition now in its fifth year.

In the Gulf, the conflict that began with Hamas’ 7 October attack on Israel has now expanded across the region, weaponising shipping and energy flows through Hormuz. Energy prices travel through transport, fertiliser, food, manufacturing, electricity and almost everything households buy.

Trump’s tariffs came as the third shock. The Dallas Federal Reserve estimates that US tariffs imposed under emergency powers in 2025 raised average import costs by 12.1 percentage points and added about 0.8 percentage points to core personal-consumption inflation by year-end. A Supreme Court ruling in February 2026 reversed part of the increase, but did........

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