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Special Edition

December 3, 2025

Hello everyone! This weekly South Asia Watch newsletter keeps you up-to-date on new developments and trends from the region, highlighting our recent reporting and insightful analysis on an area that's playing an increasingly important role in global politics, economics and business.

"Mad data," an economist texted me after India reported its latest growth numbers last Friday. In the July-to-September quarter, the country's gross domestic product grew 8.2%, up from 7.8% growth in the preceding quarter, which itself had exceeded expectations.

In the immediate aftermath, things did feel a little off. A Reuters poll of economists had forecast growth at 7.3%, and almost no one expected it to surpass the preceding quarter's level.

That was for good reason: This was the first quarter that the economy had faced the full brunt of 50% tariffs on exports to the U.S., India's largest trading destination. India's trade deficit grew by nearly 1 trillion rupees ($11 billion), year on year, during the July-September quarter.

So, what gives? A host of factors in the way India calculates GDP, economists think.

For instance, economists at HSBC said the calculation of manufacturing's production value was done without deflation being properly factored in, leading to "an overestimation of growth in periods when commodity prices are falling" -- as, for instance, oil prices have been doing over the past year.

Besides this, the deflator -- a gauge of changes in prices -- used to calculate the country's service sector growth had "much more manufacturing [elements] in it than it should," the note added.

"This is particularly a problem when manufacturing inflation is falling because of softer commodity prices. It ends up deflating services inadequately, leading to exaggerated real growth."

All of this has led to an overestimation of growth, economists say. Signs that there is a distortion are also indicated by other data points, like the record-low inflation of 0.25% reported in October.

"If you had three quarters of 7% plus growth, it should've shown up in prices, in much higher bond yields than we currently have, in much [a] higher current account deficit, in much stronger credit growth," Dhiraj Nim, India economist at ANZ, told local TV over the weekend.

However, despite potential overestimation, economists believe growth still remains sturdy. "Despite the likely overstatement in growth, our corrected number also points at GDP growth for the September quarter is in the 7% handle," the HSBC note said.

One reason is that some policies to support growth -- such as reforms of consumption taxes, which were implemented just before the local festive period -- seem to be paying off, with domestic consumption partially offsetting export pains. A strong monsoon and low inflation are also helping maintain rural and informal sector consumption, providing further support. And longer term, recent labor reforms could bolster GDP.

This means India is likely weathering the U.S. tariffs better than initially expected, which has direct consequences for Russian President Vladimir Putin's visit to India this week. India's purchases of Russian crude oil have been cited by Washington as one of the main reasons for the present tariff level, the highest in Asia, and the South Asian nation may now feel less pressure to rein in the oil purchases.

Robust growth may also embolden New Delhi in its trade negotiations with the U.S., particularly over sensitive areas like agriculture.

For more of our South Asia coverage, please check the dedicated section of our website

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It takes just about five minutes and can be accessed via this link. We will accept submissions until Monday, then compile your replies for an upcoming Big in Asia feature. We are looking forward to reading your views on the new year.

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