India's Very Strong GDP Print Has A Soft "Underbelly", Says SocGen

12:30 PM EST, 12/03/2025 (MT Newswires) -- India's real gross domestic product growth accelerated sharply to 8.2% year over year in Q3, up from 7.8% in 2Q, even as nominal GDP growth eased slightly to 8.7% year over year versus 8.8, said Societe Generale.

The key driver of this divergence was an exceptionally weak GDP deflator, which ensured that a modest slowdown in nominal GDP translated into surprisingly strong real GDP growth, noted the bank.

A significantly large discrepancy component suggests a major divergence between estimated GVA (Gross Value Added) and GDP, making it challenging to gauge the contribution of individual GDP components, stated SocGen.

According to the bank, several gaps remain in the data narrative: persistently weak inflation despite actual growth consistently exceeding potential growth; recording strong consumption during the quarter despite evidence of weakness between mid-August and late September ahead of the GST rate cut; a declining trend in e-way bill generation; and negative net foreign direct investment flows.

Based on the available data, SocGen will revise up our real GDP growth estimate for FY26, while lowering its already subdued nominal GDP forecast. However, the bank recommends tracking multiple high-frequency indicators for a clearer picture of underlying economic activity.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.