NEW DELHI: The Indian economy grew 8.2% in the July-Sept quarter as a strong comeback by the manufacturing sector and robust services activity helped it clock the fastest pace of expansion in six quarters.Strong domestic demand, which drove factories to produce more ahead of the festival season, helped India remain the fastest growing major economy and shrug off the impact of US tariffs.
“The 8.2% GDP growth in Q2 of 2025-26 is very encouraging. It reflects the impact of our pro-growth policies and reforms. It also reflects the hard work and enterprise of our people. Our govt will continue to advance reforms and strengthen Ease of Living for every citizen,” PM Narendra Modi posted on X.Combined with 7.8% growth during April-June, the economy expanded at 8% during the first half of the year, with economists and policymakers expecting a good third quarter on the back of strong sales post GST rationalization.“Now we can comfortably say full year growth will be 7% or north of 7%,” chief economic adviser V Anantha Nageswaran said after the data was released. Govt had budgeted for 6.5-6.8% GDP growth during the financial year.Apart from GST, the govt is also banking on reform measures such as the new labor codes to boost sentiment and further spur economic activity in the months ahead, with low inflation and falling interest rates adding to the positive sentiment.Manufacturing posted a sharp turnaround, clocking 9.1% growth in the second quarter of the current financial year, with service sectors seeing faster expansion. Construction too grew 7.2%, although a tad slower than July-Sept 2024. Agriculture also reported a 3.5% increase on the back of a 4.1% expansion in Q2 of the last fiscal year.‘Pvt consumption main driver of higher growth’Crisil chief economist Dharmakirti Joshi said, “Private consumption was the main driver of higher real growth. From the supply side, manufacturing and services saw a significant rise. There was a prop from statistical low-base effect as well, as the economy grew at a below-average 5.6% in the same quarter last fiscal. A low deflator also lent some buoy. Inflation based on both the Consumer Price Index and the Wholesale Price Index were lower in the second quarter compared with the first. “Lower food inflation stoked discretionary spending.”The higher-than-expected estimates prompted economists to revise their forecasts for the full year. State Bank of India is projecting 7.6% growth this year, while Crisil upped its projection by half-a-percentage point to 7%, while cautioning against the impact of US tariffs in the second half.
“Impact of tariff has started reflecting in exports growth, which grew 5.6% in Q2 on a weak base of 3% growth in 2QFY25. On the other hand imports grew 12.8% in 2QFY26,” said Devendra Kumar Pant, chief economist at India Ratings and Research.“Going forward the headwind will be the tariff impact which will get starker in Oct-Nov. The tailwind is the GST push which can negate and go beyond. This needs to be monitored going ahead,” added Madan Sabnavis, chief economist at Bank of Baroda.Now, all eyes are on the monetary policy committee led by RBI governor Sanjay Malhotra, which meets next week, to decide on interest rates amid low inflation and strong economic growth.
