New Delhi:The Indian economy grew by a higher-than-expected 8.2 per cent -- 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 per cent in the preceding three months and 5.6 per cent in the year-ago period, was also aided by a good showing by the services sector, which clocked double-digit growth.
The fourth quarter (January–March) of the fiscal year 2023–2024 saw the previous high of 8.4%.
The expansion helped India retain its position as the world's fastest-growing major economy. The Chinese economy expanded by 4.8% in the July–September quarter.
According to data published by the National Statistics Office (NSO), the GDP increased to 8% in the first half of 2025–2026 from 6.1% in the same period last year.
India may surpass the annual growth target of 6.3–6.8% for FY26, as predicted by the Economic Survey in January of this year, with an 8% growth rate in the first half.
During the quarter, the manufacturing sector recorded a robust growth of 9.1 per cent compared to 2.2 per cent in the year-ago period.
In order to meet the demand during the festival season, factories increased their output after Prime Minister Narendra Modi announced a reduction in the GST rate in his Independence Day speech. On September 22, the GST rate reduction went into force.
The performance of the services sector, including banking and real estate, also witnessed an impressive growth of 10.2 per cent from 7.2 per cent in the same period a year ago.
However, the agriculture sector growth decelerated to 3.5 per cent from 4.1 per cent in the year-ago period.
In response to the growth figures, Icra Chief Economist Aditi Nayar stated that, contrary to the general market expectation of some moderation, India's GDP growth greatly exceeded expectations, printing at a six-quarter high of 8.2% in Q2 FY2026 and showing an acceleration over the 7.8% growth seen in Q1 FY2026.
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.
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.
With the Q2 FY2026 GDP growth exceeding 8 per cent, 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.
The Reserve Bank of India increased the GDP forecast for the current fiscal year from 6.5% to 6.8% earlier in October.
According to the statement, Real Private Final Consumption Expenditure (PFCE) increased by 7.9% in the second quarter of FY2025–2026 compared to 6.4% during the same period in the prior fiscal year.
"Real GDP or GDP at Constant Prices in Q2 of FY 2025-26 is estimated at Rs 48.63 lakh crore against Rs 44.94 lakh crore in Q2 of FY 2024-25, registering a growth rate of 8.2 per cent," the NSO said in the statement.
Nominal GDP, also known as GDP at Current Prices, is projected to be Rs 85.25 lakh crore in Q2 of FY 2025–2026, up 8.7% from Rs 78.40 lakh crore in Q2 of FY 2024–2025.
The real GDP, or GDP at Constant Prices, for the first half of the current fiscal year is projected to be Rs 96.52 lakh crore, up 8% from Rs 89.35 lakh crore in the first half of 2024–2025.
According to the statement, nominal GDP, or GDP at current prices, is projected to be Rs 171.30 lakh crore in H1 of 2025–2026 as opposed to Rs 157.48 lakh crore in H1 of 2024–2025, indicating an 8.8% growth rate.
Gross Fixed Capital Formation (GFCF) has recorded a 7.3 per cent growth rate at Constant Prices against the growth rate of 6.7 per cent in Q2 of FY25.
During the second quarter of this fiscal year, the discrepancies (differences in values calculated using different methods of GDP estimation) reached Rs 1.62 lakh crore.
According to Rumki Majumdar, an economist at Deloitte India, India's Q2 FY 2025 26 GDP growth was higher than anticipated at 8.2% year over year.
"We anticipate a significant upward revision to full-year growth estimates, with festive season spending and the momentum from GST 2.0 likely to support activity in Q3," she stated.
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 voiced concern that the government would find it more difficult to reach its fiscal deficit targets, which are expressed as a percentage of GDP.