Can it expand at such a brisk pace for years to come?

However, it would not be out of place to temper this moment of optimism with a reality check.

The 8.2% number for the three months from July to September rides on the back of a strong 9.1% uptick in manufacturing. This is at odds with the index for industrial production, which averaged under 4% over those months, and also data on the core sector, which registered cumulative growth of 2.9% over April-September.

Bear in mind too the International Monetary Fund’s recent reservations about the quality of India’s income accounting; it gave India a ‘C’ in its data adequacy assessment.

Since corporate earnings in the consumer goods sector have been anaemic, a rise in private consumption expenditure of 7.9% in the second quarter (9.3% in current prices) could tempt marketers of various consumer goods to break into a jig. But that would be premature. They should wait for another quarter’s numbers to reveal the impact of India’s mid-year GST cuts.

The difference between growth rates in constant and current prices is explained by inflation (both wholesale and retail). The second quarter’s real GDP expansion rate of 8.2% is just half a percentage point less than its nominal rate of 8.7%. For the first half, the ‘deflator’ is only a bit more; a nominal rate of 8.8% translates to 8% in real terms.

This year’s budget, however, had assumed nominal GDP growth of 10.1%, which now looks steep. Unless inflation jumps in the second half, the government’s annual tax collections may turn out less than projected, which means public spending would need a pullback to keep the fiscal deficit within 4.4% of GDP, its target for 2025-26.

While robust consumption could conceivably ease the Centre’s need to support national output fiscally, it is unclear if we have reached that point. In the first half of this year, the ‘public administration, defence and other services’ component of GDP grew faster than overall output.

Although this May’s hostilities with Pakistan lasted only four days, the broader mobilization would have been on a far bigger scale. In the second half, thus, public expenditure faces compression and the economy is expected to lose some pace.

This is not to overlook the possibility of a boom in consumer buying spurred by GST rate reductions that took effect on 22 September. How this stimulus is playing out, though, will not be known till early next year. The hope is that it will lure businesses to invest more in capacity. For the economy to sustain a growth trajectory of 8% plus for years together, fixed capital formation must rise at least five percentage points above 30.5% of GDP, a level it seems stuck at.

As the Centre shifts to reducing its pile of debt as its fiscal target from 2026-27, it will not have much space to invest. Private investment would have to kick in. If clouds lift on the export horizon, all the better. But if capacity addition disappoints, we should bet on infrastructure to attract private funds.

The budget speech had promised a policy for public-private partnerships (PPPs) for that. While whiffs of scandal had given PPPs a bad name, given sufficient transparency, such projects could deliver what the economy needs.