India’s economy posted a stronger-than-expected expansion in the July–September quarter of FY2025-26, with real GDP rising 8.2% year-on-year. The official release highlighted robust activity across the secondary and tertiary sectors, with manufacturing and services showing notable strength.
What the numbers say (quick facts)
- Real GDP (Q2): +8.2% YoY
- Nominal GDP (Q2): +8.7% YoY
- Sectoral growth: Tertiary 9.2%, Secondary 8.1% (Manufacturing 9.1%, Construction 7.2%)
- Comparative context: This is the fastest quarterly growth in six quarters.
Sectoral breakdown
The government’s release shows the tertiary sector (services) as the main contributor to the uptick, with strong performances in trade, hospitality, and IT-related services. Manufacturing recorded above-9% growth, supported by domestic demand and incremental export activity. Construction continued its recovery, registering mid-single-digit growth.
Why growth surprised
Analysts point to a mix of demand-side recovery, recent policy measures, and improving external conditions. High-frequency indicators — including industrial production and services PMIs — suggested acceleration ahead of the official print. Fiscal and structural reforms were cited by policymakers as supporting the rebound.
Forecasts & outlook
Market and policy reactions vary: while the government and the Chief Economic Adviser (CEA) have flagged the likelihood of FY2025-26 growth topping 7% and GDP crossing the $4 trillion mark, multilateral institutions like the IMF maintain a more conservative FY26 forecast (near the mid-6% range). The Q2 beat, however, has led many private-sector forecasters to nudge up near-term growth expectations.
Policy reaction & market impact
Senior officials welcomed the data as evidence of the economy’s resilience. The finance ministry and FM noted that reforms and fiscal consolidation helped. Markets reacted positively on the day — equities rallied while bond yields showed mixed moves as traders digested inflation and interest-rate implications.
Risks & caveats
Key risks include external headwinds (global demand shocks, trade tensions), volatility in commodity prices, and the transmission of global monetary conditions. Also, the timing and persistence of domestic demand recovery will determine whether the Q2 momentum extends into H2 of FY26.
What to watch next
- Q3 (Oct–Dec) high-frequency indicators: industrial production, GST collections.
- Fiscal policy updates and the upcoming budget cues.
- External sector developments and global growth outlook.