India grew faster than widely expected in July-September 2025 as a surge in consumption and manufacturing offset impact of US tariffs on the world’s fourth largest economy.
India’s GDP growth rate stood at 8.2% in Q2 FY26 as against 7.8% in Q1 FY26 and 5.4% in the year-ago period, according to government data released on Friday. Economists polled by Reuters had estimated the GDP print at 7.3%, while an SBI Research report pegged the figure at 7.5%. Bloomberg had estimated the figure at 7.4%.
- Consumption rose 7.9% YoY in Q2 FY26 vs 7.0% in Q1 FY26
- Manufacturing output rose 9.1% YoY in Q2 FY26 vs 7.7% in Q1 FY26
- Construction activity grew 7.2% YoY in Q2 FY26 vs 7.6% in Q1 FY26
- Government spending down 2.7% YoY vs 7.4% up in Q1 FY26
“[India’s GDP] growth rate has exceeded expectations dramatically to 8.2%, led by statistically favourable deflator effects, lagged effects of monetary and regulatory easing and a limited hit so far on India’s exports,” Madhavi Arora, chief economist at Emkay Global Financial Services Ltd., told Reuters.
“Some of these factors will spill over to Q3 as well, along with improvement in consumer demand, leading to FY26E GDP comfortably hugging 7% print.”
On 23 August, the United States imposed 50% tariffs on India’s exports due to its import barriers and purchase of Russian oil, which President Donald Trump said was fueling Moscow’s war in Ukraine. On 22 September, GST 2.0 came into effect to reduce tax on hundreds of items—from soaps to small cars—to spur domestic production. The impact of both the moves has yet to show meaningfully in India’s quarterly GDP growth rate.
Earlier, India’s inflation rate slumped to a record low of 0.25% in October 2025, raising chances of a rate cut by the Reserve Bank of India in its next monetary-policy review in December.
“The MPC faces a challenging act at the December rate review, with the mix of a strong growth print and record low inflation,” Radhika Rao, senior economist at DBS Bank Singapore, told Reuters. “We expect an emphasis on forward-looking growth guidance and high real rate buffer due to weak inflation to justify a move to lower rates further.”
India Q2 GDP @ 8.2% — Economists’ Take
- Garima Kapoor, economist at Elara Securities: “The blockbuster GDP growth has been led by front-loading of exports along with strong govt spending, especially capex, amid a supportive base effect.”
- Suvodeep Rakshit, chief economist at Kotak Institutional Equities: “Looking ahead, GDP growth is expected to print strongly again in Q3 FY26, supported by festive-season demand and pent-up consumption at the start of the quarter. India’s real GDP growth remains on track to average around 7.5% in FY26.”
- Upasna Bhardwaj, chief economist at Kotak Mahindra Bank: “The single-digit nominal GDP growth continues to signal tepid underlying activity. Despite the high real GDP growth, we retain our expectations of 25 bps of rate cut in the upcoming policy as inflation remains benign.”
