India’s Q2 FY26 GDP Grows 8.2%: Economists Cite Deflators and Strong Economic Activity

India recorded 8.2% GDP growth during the July–September quarter (Q2 FY26). Economists now expect full-year FY26 growth to reach 7.5% or higher, supported by sustained high-frequency indicators and favourable price dynamics.

Role of the GDP Deflator in Growth Numbers

• Economists highlighted that part of the high real GDP growth reflects the effect of the GDP deflator, a key inflation measure used in national accounts.
• The GDP deflator is calculated as:
  GDP at Current Prices ÷ GDP at Constant Prices.

What the GDP Deflator Captures

• A comprehensive inflation measure covering the entire economy, including:
  • Agriculture
  • Industry
  • Services
• More than two-thirds of the deflator currently reflects wholesale inflation (WPI); the remainder comes from retail inflation (CPI).
• Because it uses the full economy-wide output basket, it is broader than CPI or WPI.

Why the Deflator Matters

• The deflator reveals how much of GDP growth comes from:
  • Price changes, versus
  • Actual output expansion.
• A lower deflator (i.e., lower inflation) boosts real GDP growth, even if nominal growth remains moderate.
• It is also called the implicit price deflator.

Coverage and Exclusions

• Includes all final goods and services produced domestically, including exports.
• Does not include import prices, since imports are not part of domestic output.

Relationship Between Real and Nominal GDP

• Nominal GDP: measured at current prices; not adjusted for inflation.
• Real GDP: measured at constant prices; adjusted for inflation.
• In a growing economy, nominal GDP is usually higher than real GDP.
• The deflator measures the inflation differential between nominal and real GDP.

Sources: BL& TH