India’s Economy Expands 8.2% in Q2, the Fastest Growth in Six Quarters

India’s GDP Growth Hits Six-Quarter High of 8.2% in Q2 as Economy Defies Slowdown Fears

India’s economy continued its robust momentum into the July–September quarter, posting a six-quarter high GDP growth of 8.2% in Q2FY26, according to data released by the Ministry of Statistics on November 28. The reading exceeded all projections, comfortably beating the economists’ poll estimate of 7.3% and the Reserve Bank of India’s forecast of 7%.

The print also marked the third consecutive quarter of 7%+ growth, strengthening India’s position as the fastest-growing major economy and reinforcing expectations that the country will easily surpass 7% growth for FY26, even as global headwinds persist.

Q2 Growth Surges Beyond Expectations, Led by Financial Services and Manufacturing

Aditi Nayar, Chief Economist at ICRA, described the performance as another quarter of “significant upside surprise,” noting that the strong 8.2% expansion highlights resilience across key sectors despite external uncertainties.

The Q2 performance was powered by two engines:

• Manufacturing, which surged 9.1%, significantly higher than the 2.2% rise in Q2FY25

• Financial, real estate and professional services, which grew a striking 10.2%, a nine-quarter high

Gross Value Added (GVA)—a more stable measure of economic activity—grew 8.1%, up sharply from 5.8% a year ago, signalling broadbased strength across production sectors.

Manufacturing alone now accounts for over 16% of GVA, aided by pre-festive stocking, strong corporate profitability and a recovery in investment activity.

Financial and business services remained the biggest contributor, touching ₹12.38 lakh crore in GVA terms. source: Moneycontrol

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Construction, Trade and Services Hold Firm While Agriculture Remains Soft

The large services cluster—trade, hotels, transport, communication and broadcasting—expanded 7.4%, maintaining the stable traction seen over the last year.

Construction activity also held up well, growing 7.2%, supported by public capex and a steady revival in real-estate deployments.

However, agriculture remained subdued, rising 3.5%, compared with 4.1% a year earlier. With delayed monsoon withdrawal and uneven rainfall patterns, economists expect rural recovery to remain uneven in the coming quarters.

Mining activity was flat, indicating lingering supply constraints and lower commodity realisations.

Consumption Momentum Strengthens While Investment Stays Resilient

On the expenditure front, private consumption (PFCE) —which accounts for nearly 60% of GDP—rose 7.9%, a clear improvement from the 6.4% growth in the same quarter last year. This expansion came despite the temporary disruption caused by the GST rate revisions that took effect on September 22.

Gross fixed capital formation (GFCF), a proxy for investments, grew 7.3%, marking another strong quarter for capital expenditure, although slightly softer than the 7.8% in Q1.

Government spending remained the weak link:

• GFCE contracted 2.7%, reflecting fiscal consolidation and tighter central and state spending.
  Even so, private sector demand and investment were strong enough to offset this drag, keeping headline GDP elevated.

External demand again acted as a net negative, with:

• Exports rising 5.6%

• Imports surging 12.8%

This widened the real trade deficit, a trend expected to persist due to firm domestic demand and a weak rupee.

IMF Flags Domestic Demand Strength as Global Pressures Persist

The IMF, in its recent Article IV consultation, noted that India’s resilience is primarily rooted in robust domestic demand, even as global uncertainty—ranging from slower world trade to US tariffs on Indian exports—poses challenges.

The Q2 numbers reaffirm that India’s economic engine continues to be powered internally by strong consumption and investment momentum, despite soft global cycles.

Nominal GDP Raises Concerns as Deflator Remains Muted

One area of concern is nominal growth.
Nominal GDP grew just 8.7%, only marginally above real GDP.

Economists point out that the GDP deflator-based inflation is now just 0.8%, dragged down by:

• CPI inflation at 2.2%

• WPI near 0.1%

According to DK Srivastava of EY India, “below-trend nominal GDP growth has significant implications for fiscal aggregates,” as it impacts tax revenues and the government’s deficit math.

Economists Split on Rate Cut Expectations as Growth Beats RBI Forecasts

With back-to-back strong quarters—7.8% in Q1 and 8.2% in Q2—India’s first-half growth now stands near 8%, offering comfort even if growth moderates in the second half due to base effects.

Aditi Nayar believes the blistering Q2 print “eases the probability of a rate cut” in the RBI’s December MPC meeting, despite low inflation.

However, the economist community is divided.

Upasna Bhardwaj of Kotak Mahindra Bank argues that “despite high real growth, a 25 bps rate cut is still possible given the benign inflation trajectory.”

Economists expects GDP growth to average 6.9% for FY26, slightly higher than the RBI’s 6.8% projection.

At the current pace, India appears on track for 7.2% growth in FY26.

Outlook: India’s Economy Poised to Maintain Strong Momentum in FY26

With strong manufacturing gains, a buoyant services sector, healthy private consumption, and resilient investment activity, India’s economic outlook remains robust. Although external trade pressures and low nominal GDP growth present challenges, the underlying momentum suggests that India’s growth engine is firmly anchored.

As Q2’s stellar print shows, the Indian economy continues to defy global slowdown trends—keeping it well on course to surpass 7% GDP growth for FY26.

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