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India’s Economy Surges to 8.2% in Q2 FY26, Defying Global Pressures and US Tariffs
New Delhi | Nov 28, 2025
India’s economic engine picked up remarkable speed in the July–September quarter of FY26, posting a stronger-than-expected GDP growth rate of 8.2%, even as global uncertainties and US tariff pressures loomed in the background. Government data released on Friday shows that the country outpaced both domestic and international forecasts, surprising economists who had expected growth in the 7.3%–7.5% range.
What Happened?
India’s GDP expanded by 8.2% in Q2 FY26, up from 7.8% in Q1 FY26 and significantly higher than 5.4% in the same period last year. The sharp rise was driven by strong consumer spending, a resurgence in manufacturing activity, and supportive statistical factors.
Who Is Driving the Growth?
According to economists, the numbers reflect a combination of factors:
A boost from lower inflation, which improved purchasing power.
Earlier monetary and regulatory easing that is still feeding through the economy.
Strong momentum in consumption and manufacturing despite external trade shocks.
Madhavi Arora, chief economist at Emkay Global Financial Services, noted that the growth performance exceeded expectations due to “favourable deflator effects” and a “limited hit” to exports so far.
Key Sector Numbers
Consumption: Up 7.9% YoY (vs 7.0% in Q1), showing Indians are spending more.
Manufacturing: Up 9.1% YoY (vs 7.7% in Q1), marking one of the strongest expansions in recent quarters.
Construction: Grew 7.2% YoY (slightly lower than 7.6% in Q1), remaining steady.
Government spending: Fell 2.7% YoY after rising 7.4% in Q1, indicating fiscal tightening.
Why It Matters Now
The report comes months after the United States imposed 50% tariffs on Indian exports in August, citing trade barriers and India’s continued purchase of discounted Russian oil. Despite these tariffs, the data indicates that the impact has not yet meaningfully slowed growth.
Meanwhile, India rolled out GST 2.0 on September 22, lowering taxes on hundreds of essential and mass-market items to spur manufacturing and consumption. Economists say the effect of this reform is still unfolding and will likely show more clearly in upcoming quarters.
When Could Things Change?
The next crucial checkpoint is the RBI’s December monetary-policy review, and the latest inflation numbers complicate the picture. With inflation dropping to a record 0.25% in October, the central bank faces the delicate task of balancing strong growth with unusually soft price pressures.
Economist Radhika Rao of DBS Bank believes the RBI may lean toward a rate cut, supported by “weak inflation and high real rate buffers.”
What Economists Are Saying
Garima Kapoor, Elara Securities: Growth was boosted by strong government spending, front-loaded exports, and a supportive base effect.
Suvodeep Rakshit, Kotak Institutional Equities: Festive demand and pent-up consumption will likely keep Q3 growth strong, with FY26 GDP averaging around 7.5%.
Upasna Bhardwaj, Kotak Mahindra Bank: Despite high real growth, low nominal growth signals underlying caution. She still expects a 25 bps rate cut in the December review.
What’s Next?
Economists anticipate that some of the favourable factors from Q2—especially strong consumer demand and easing financial conditions—will spill into Q3. However, the full impact of global tariffs, domestic tax reforms, and future monetary decisions will shape how strongly the economy can maintain its pace.
India’s Economy Surges to 8.2% in Q2 FY26, Defying Global Pressures and US Tariffs
India’s GDP jumped to 8.2% in the July–September quarter of FY26, beating all major forecasts and staying resilient despite the 50% tariffs imposed by the United States in August. The growth is higher than Q1’s 7.8% and far above last year’s 5.4% for the same quarter.
The boost came mainly from stronger consumption, which grew 7.9% year-on-year, and a sharp rise in manufacturing output at 9.1%. Construction activity remained steady at 7.2%. Government spending, however, dipped 2.7% after strong growth in the previous quarter.
Economists say this strong performance is supported by low inflation, earlier policy easing, and a limited impact of tariffs so far. GST 2.0, launched in late September to reduce taxes on many items, is also expected to support growth in the coming months.
With inflation falling to a record low of 0.25% in October, experts expect the Reserve Bank of India to consider a rate cut in its December policy meeting. Many economists project that India could maintain an average growth rate of around 7.5% for FY26.
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