India’s economy is growing at a healthy 7.8 per cent, yet its stock markets keep falling. How can both be true at once?

The short answer: the economy and the market measure different things. GDP reflects domestic activity — factories producing, services selling, people spending. Markets reflect what investors expect to happen next, and right now those expectations are clouded by global risks.

The RBI’s September bulletin puts it plainly: the domestic economy is resilient, but equity markets stayed subdued through August and September as foreign investors turned net sellers. Crude oil at $107 a barrel hurts India, the world’s third-largest oil importer, by raising the import bill and squeezing company profits.

Rising US bond yields are another factor. When American government bonds pay over 5 per cent, global investors pull money out of emerging markets like India to buy safer US assets. Foreign investors have withdrawn $3.7 billion from Indian equities in September alone.

None of this means the economy is weak — industrial output grew 8 per cent in August. It means markets are pricing in external risks: oil, war and global interest rates. When those calm down, the gap between GDP and the markets may close.