New Delhi:The Indian economy expanded by a higher-than-anticipated 8.2%—a six-quarter high—as the slowdown in farm output was countered by higher factory production in anticipation of an increase in consumption from the GST rate cut.
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. During the July-September quarter, the Chinese economy grew by 4.8 per cent.
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 per cent in the year-ago period.
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 per cent in the year-ago period.
The manufacturing sector saw a strong 9.1% growth during the quarter, up from 2.2% during the same period last year.
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. On September 22, the GST rate reduction went into force.
The services sector's performance, which includes banking and real estate, also saw a remarkable increase of 10.2% from 7.2% during the same time last year.
However, the agriculture sector growth decelerated to 3.5 per cent from 4.1 per cent 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 per cent in Q2 FY2026, and displaying an acceleration over the 7.8 per cent growth seen in Q1 FY2026, in contrast to the widespread market expectation of some moderation.
She stated that while the government's final consumption expenditure decreased as anticipated due to low revenue spending, the growth in gross capital formation slowed between these quarters. She added that differences were crucial in boosting GDP growth in Q2 FY2026 over the previous quarter.
The pace of growth from the strong 8% observed in H1 FY2026 may be slowed by an unfavorable base, the possible negative effects of US tariffs, and the Government of India's limited headroom for capital spending (compared to the Budget Estimates). Nevertheless, the FY2026 real GDP expansion now appears set to materially exceed 7 per cent," she noted.
Despite the series-low CPI inflation report for October 2025, she claimed that the likelihood of a rate cut in the December 2025 MPC review has undoubtedly decreased with the Q2 FY2026 GDP growth exceeding 8%.
Earlier in October, the Reserve Bank of India had upped the GDP forecast to 6.8 per cent from the earlier projection of 6.5 per cent for the current financial year.
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.
The NSO stated in the statement, "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 percent."
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.
As regards the first half of the current fiscal, the real GDP or GDP at Constant Prices is estimated at Rs 96.52 lakh crore against Rs 89.35 lakh crore in H1 of 2024-25, registering a growth rate of 8 per cent.
Nominal GDP or GDP at Current Prices in H1 of 2025-26 is estimated at Rs 171.30 lakh crore compared to Rs 157.48 lakh crore in H1 of 2024-25, showing a growth rate of 8.8 per cent, the statement said.
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.
"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.