India Records Six-Quarter High GDP Growth of 8.2% In Q2

The Indian economy grew by a higher-than-expected 8.2% -- a six-quarter high -- as increased factory production in anticipation of a consumption boost from the GST rate cut helped offset deceleration in farm output.

The growth in the second quarter, which compared to 7.8% in the preceding three months and 5.6% in the year-ago period, was also aided by a good showing by the services sector, which clocked double-digit growth.

The previous high at 8.4% was posted in the fourth quarter (January-March) of fiscal 2023-24.

The expansion helped India retain its position as the world's fastest-growing major economy. During the July-September quarter, the Chinese economy grew by 4.8%.

As per data released by the National Statistics Office (NSO), the Gross Domestic Product (GDP) in the first half of 2025-26 worked out to be at 8 per cent, up from 6.1% in the year-ago period.

With an 8% growth rate in the first half, India may exceed the annual growth target of 6.3-6.8% for FY26 as projected in the Economic Survey in January this year.

During the quarter, the manufacturing sector recorded a robust growth of 9.1% compared to 2.2% in the year-ago period.

Following the GST rate cut announcement by Prime Minister Narendra Modi in his Independence Day address, factories stepped up their output to meet the festival season demand. The GST rate cut came into effect on September 22.

The performance of the services sector, including banking and real estate, also witnessed an impressive growth of 10.2% from 7.2% in the same period a year ago.

However, the agriculture sector growth decelerated to 3.5% from 4.1% in the year-ago period.

Commenting on the growth numbers, Icra Chief Economist Aditi Nayar said India's GDP growth significantly surpassed expectations, printing at a six-quarter high of 8.2% in Q2 FY2026, and displaying an acceleration over the 7.8% growth seen in Q1 FY2026, in contrast to the widespread market expectation of some moderation.

While the government's final consumption expenditure expectedly contracted, led by weak revenue spending, the growth in gross capital formation moderated between these quarters, she said, adding that discrepancies played an important role in bumping up the GDP growth in Q2 FY2026 compared to the preceding quarter.

"An adverse base, the potential negative impact of US tariffs and limited headroom for capital spending by the Government of India (vis-a-vis the Budget Estimates) may dampen the pace of growth from the robust 8% seen in H1 FY2026. Nevertheless, the FY2026 real GDP expansion now appears set to materially exceed 7%," she noted.

With the Q2 FY2026 GDP growth exceeding 8%, she said, the probability of a rate cut in the December 2025 MPC review has certainly eased, notwithstanding the series-low CPI inflation print for October 2025.

Earlier in October, the Reserve Bank of India had upped the GDP forecast to 6.8% from the earlier projection of 6.5% for the current financial year.

The statement further said the Real Private Final Consumption Expenditure (PFCE) has reported a 7.9% growth rate during Q2 of FY2025-26 against the 6.4% growth rate in the corresponding period of the previous financial year.

"Real GDP or GDP at Constant Prices in Q2 of FY 2025-26 is estimated at ₹48.63 lakh crore against ₹44.94 lakh crore in Q2 of FY 2024-25, registering a growth rate of 8.2%," the NSO said in the statement.

Nominal GDP or GDP at Current Prices in Q2 of FY 2025-26 is estimated at ₹85.25 lakh crore compared to ₹78.40 lakh crore in Q2 of FY 2024-25, showing a growth rate of 8.7%.

As regards the first half of the current fiscal, the real GDP or GDP at Constant Prices is estimated at ₹96.52 lakh crore against ₹89.35 lakh crore in H1 of 2024-25, registering a growth rate of 8%.

Nominal GDP or GDP at Current Prices in H1 of 2025-26 is estimated at ₹171.30 lakh crore compared to ₹157.48 lakh crore in H1 of 2024-25, showing a growth rate of 8.8%, the statement said.

Gross Fixed Capital Formation (GFCF) has recorded a 7.3% growth rate at Constant Prices against the growth rate of 6.7% in Q2 of FY25.

The discrepancies (differences in values calculated using different methods of GDP estimation) jumped to ₹1.62 lakh crore during the second quarter of this fiscal.

India's Q2 FY 2025–26 GDP growth came in stronger than expected at 8.2% year-on-year, Rumki Majumdar, Economist, Deloitte India, said.

"With festive season spending and the momentum from GST 2.0 likely to support activity in Q3, we anticipate a significant upward revision to full-year growth estimates," she said.

India's GDP deflator has fallen to its lowest level since 2019, pulling down nominal GDP growth, she said, adding that this poses challenges for key ratios tied to nominal GDP, such as fiscal deficit, debt, and current account.

She expressed apprehension that it will be harder for the government to meet its fiscal deficit targets, which are measured as a percentage of GDP.