India’s 7.8% GDP Boom: Real Progress or Phantom Prosperity?
India’s economy has clocked an impressive 7.8% growth in the first quarter of FY 2025-26, surpassing expectations and signaling resilience against looming global trade tensions. Yet, beneath the headlines, audits and reports paint a troubling picture of inflated spending on incomplete projects and systemic fraud, raising doubts about the quality of this expansion. As government expenditure fuels much of the surge, citizens grapple with whether these numbers translate to tangible benefits or merely paper victories.
- The Official Growth Narrative
- Unpacking Government Schemes: PMAY Under Scrutiny
- Infrastructure Challenges: The Bharatmala Saga
- Decoding GDP: What’s Really Driving the Numbers?
- Broader Economic Indicators: Unemployment, Savings, and Migration
- Public Debate: Optimism vs. Reality Check
- Data Integrity and Methodology Concerns
The Official Growth Narrative
Official data from the Ministry of Statistics and Programme Implementation (MoSPI) shows India’s real GDP expanding by 7.8% year-on-year in Q1 FY 2025-26, up from 6.5% in the same period last year. Nominal GDP reached Rs 86.05 lakh crore, reflecting an 8.8% increase. This growth, the highest in five quarters, comes amid threats like potential 50% US tariffs under a new administration, yet it defies slowdown fears with strong contributions from manufacturing (up 8.4%) and services (7.2%).
Government officials attribute the momentum to strategic spending on infrastructure and welfare, positioning India as a bright spot in a sluggish global economy. Private final consumption expenditure grew 7.0%, supported by rural demand and monsoon boosts, while gross fixed capital formation held steady at 7.5%. However, this narrative contrasts with critiques that much of the boost stems from public outlays on projects plagued by inefficiencies.
Unpacking Government Schemes: PMAY Under Scrutiny
The Pradhan Mantri Awas Yojana (PMAY), hailed as a cornerstone of housing for the poor with over 1.2 crore homes sanctioned, faces severe allegations of fraud and mismanagement. A 2022 CAG report on PMAY-Gramin revealed massive irregularities: houses sanctioned to “unknown” beneficiaries, Rs 50.28 crore in irregular expenditure across sampled blocks, and only 55% completion rate (2.80 lakh out of 5.09 lakh sanctioned). Inspection records were manipulated with fake geotagging, underscoring systemic flaws.
Recent updates amplify these concerns. In August 2025, over 9,000 people in Prayagraj, many owning two-storey homes, received Rs 1.20 lakh each despite being ineligible; authorities have initiated recovery and inquiries into approving officials. Similar scandals span states: in Vadodara, houses were allotted to NRIs and builders under schemes meant for the underprivileged, with at least 14 eviction notices issued for renting out subsidized flats. West Bengal saw political discrimination in beneficiary selection, Odisha reported contractors vanishing after payments, and Madhya Pradesh faced scams in nagar panchayats.
Activists point out that many “constructed” houses exist only in records, not on the ground, with beneficiary lists riddled with ineligible names while deserving poor are excluded. These “ghost houses” inflate government spending figures, contributing to GDP without delivering real development.
Infrastructure Challenges: The Bharatmala Saga
India’s ambitious Bharatmala highway project, aimed at building 34,800 km of roads, exemplifies how infrastructure dreams turn into fiscal nightmares. Costs have ballooned from Rs 5.35 lakh crore to over Rs 10.64 lakh crore, a near-100% overrun, with only 13,499 km completed by March 2023. A 2023 CAG report flagged “innumerable deficiencies” and “clear violations of tender bidding process,” including projects awarded without detailed reports and based on falsified documents.
The Dwarka Expressway stands out: costs surged from Rs 529 crore to Rs 7,287 crore (1,278% increase), with per-km expenses hitting Rs 250 crore against an approved Rs 18 crore. Overruns included Rs 238.36 crore in Odisha alone, with undue benefits to contractors worth Rs 69.54 crore. Broader MoSPI data for 2025 shows 449 infrastructure projects facing Rs 5.01 lakh crore in overruns, affecting sectors like roads and railways.
Here’s a snapshot of major cost overruns in key projects:
| Project | Original Cost (Rs crore) | Revised Cost (Rs crore) | Overrun Percentage |
| Bharatmala Phase-I | 535,000 | 1,064,000 | 99% |
| Dwarka Expressway | 529 | 7,287 | 1,278% |
| Odisha Road Projects (Sampled) | 725 | 963 | 33% |
Such escalations, often due to land acquisition delays and suboptimal planning, add to GDP through spending but deliver crumbling or incomplete assets, questioning the value for taxpayers.
Decoding GDP: What’s Really Driving the Numbers?
GDP = Private Consumption + Government Spending + Investments + Net Exports (Exports – Imports). In Q1 2025-26, government spending rose 7% to Rs 50.65 lakh crore, emerging as the primary driver amid stagnant private investments (down 19% to $26.4 billion) and modest export growth (5.94%). Household consumption, while up, masks declining savings and rising borrowing.
Critics argue this reliance on public expenditure—often tied to fraudulent or inefficient projects—creates “ghost development.” For instance, rebuilding flood-prone roads annually doubles GDP on paper but yields no lasting productivity. Inflation, at a low 1.55% in July 2025, raises eyebrows when paired with high growth, as historical data from non-communist nations shows such rates typically accompany higher price pressures.
Broader Economic Indicators: Unemployment, Savings, and Migration
Despite the growth hype, youth unemployment remains a crisis: CMIE data pegs it at 15% in May 2025, with urban rates at 18.8% and rural at 13.8%. Household savings hit a 47-year low of 5.1% of GDP in 2022-23, dropping further to 18.1% in FY24 amid rising liabilities. Millionaire outflows, while easing to 3,500 in 2025 from 5,100 in 2023, still rank India among the top globally, signaling unease among the wealthy.
These metrics highlight a disconnect: high taxes fund subpar services, infrastructure crumbles despite “investments,” and migration persists.
Public Debate: Optimism vs. Reality Check
Voices defending the growth cite gradual improvements in infrastructure and urge realism given India’s $3,000 per capita GDP. “Infrastructure takes time,” one perspective notes, attributing overruns to democratic hurdles like court cases and environmental objections. Yet, skeptics counter that questioning corruption isn’t pessimism—it’s accountability. “We’re taxpayers, not beggars,” echoes a common sentiment, pointing to Rs 5 lakh crore wasted on 449 delayed projects.
Historical parallels draw ire: comparisons to 1970s centralization under Indira Gandhi, or warnings of a “dictatorship” via captured institutions like ECI and CBI. Others lament a “corrupted society” breeding parasitic politicians, while calls for citizen verification through videos gain traction.
Data Integrity and Methodology Concerns
India’s GDP data earns a “C – Use with caution” rating from World Economics due to potential government interference. The 2015 methodology change, shifting to MCA21 database, has been criticized for overestimation. Former CEA Arvind Subramanian’s Harvard paper estimates a 2.5% overstatement between 2011-17, citing discrepancies with proxies like exports and credit growth. While the government rebuts this, large unexplained gaps in calculations fuel doubts.
Unpublished reports and selective data releases, like withholding poverty indices, erode trust. Economists like Raghuram Rajan have echoed calls for overhaul, warning that flawed metrics mislead policy.
India’s 7.8% growth is technically accurate, but when phantom projects and corruption pad the figures, it begs reflection on quality over quantity. As the nation navigates tariffs and internal woes, sustainable progress demands transparency.
What if the true measure of development isn’t GDP, but how it lifts everyday lives?