India’s economy recorded an impressive 8.2% growth in the July to September quarter, marking the fastest expansion in six quarters. This surge was powered predominantly by a significant rebound in manufacturing and robust activity within the services sector. The timing of this revival corresponded with the pre-festival season demand, which stimulated domestic production.

This strong quarterly performance helped India maintain its position as the fastest growing major economy globally, despite challenges such as the ongoing US tariffs. Domestic demand played a crucial role, driving factories to ramp up output and contributing extensively to the overall GDP growth.

The acceleration in economic activity has led economists and policymakers alike to revise their growth outlook for the entire financial year.

Prime Minister Narendra Modi highlighted the growth rate as evidence of the success of pro-growth policies and reforms pursued by the government. He credited the enterprise and hard work of the Indian people, affirming that the government would continue to focus on reforms to improve the ease of living for citizens. This message came amid projections that full-year GDP growth could comfortably surpass 7%, exceeding the government’s initial forecast of 6.5 to 6.8%.

The manufacturing sector was a standout contributor, achieving a strong 9.1% growth in Q2. This sharp turnaround reflected renewed industrial confidence and demand. The services sector also expanded significantly, alongside construction, which grew by 7.2%, albeit at a slightly slower pace than the same period in the previous year. Agriculture grew by 3.5%, slightly below last year’s Q2 growth of 4.1%, but still contributing positively overall.

Private consumption emerged as the principal driver of this robust growth. Analysts from Crisil noted that from the supply side, manufacturing and services sectors showed significant improvement.

The expansion was partly aided by a statistical low base from the same quarter last year, when growth was subdued at 5.6%. Furthermore, lower inflation during the quarter, with decreases in both consumer and wholesale price indices, encouraged discretionary spending, particularly due to reduced food inflation.

Market watchers have responded by adjusting their growth forecasts upwards. The State Bank of India has raised its full-year forecast to 7.6%, while Crisil raised its estimate to 7%. Nonetheless, some caution remains, especially regarding the impact of US tariffs, which have already started to affect export growth modestly, with exports increasing by 5.6% in Q2 compared to 3% during the same quarter last fiscal year. Imports, however, rose more sharply by 12.8%, reflecting strong domestic demand.

Economists suggest that the effects of the tariffs will intensify in the coming months, particularly in October and November, potentially posing a headwind to growth. However, offsetting this is the government’s GST rationalisation, thought to stimulate sales and economic activity further. Both the negative and positive forces are expected to play a role, warranting close monitoring in subsequent quarters.

With inflation low and economic growth strong, attention now turns to the Reserve Bank of India’s monetary policy committee, which is scheduled to meet soon. Decisions on interest rates will be pivotal, as the RBI balances the need to sustain growth while keeping inflation in check.

Public reaction to the GDP data has been mixed. Supporters have welcomed the numbers, viewing them as validation of the government’s reform-driven approach. Others remain skeptical, questioning the accuracy of the statistics and pointing to lingering economic challenges, including currency depreciation and comparisons to other countries’ economic frameworks. This debate reflects a broader discourse on how headline figures translate into tangible improvements in everyday life.

Overall, the 8.2% GDP growth in Q2 2025-26 signals strong momentum in the Indian economy driven by domestic consumption, manufacturing revival, and structural reforms, though external risks and economic realities remain under close scrutiny.

Agecies