India posts strongest quarterly growth in six terms as GDP jumps 8.2 per cent in Q2

India’s economy grew by 8.2 per cent in the second quarter of 2025-26, marking the highest growth in six quarters. This was better than the 7.8 per cent growth in the previous quarter and 5.6 per cent in the same period last year. Analysts say the growth came mainly from strong factory production and a good performance by the services sector, which helped offset slower growth in agriculture.

The manufacturing sector grew 9.1 per cent compared to just 2.2 per cent in the same period last year. After Prime Minister Narendra Modi announced a GST rate cut on September 22, factories increased production to meet higher demand during the festival season.

The services sector, which includes banking, real estate, and professional services, also performed well, growing 10.2 per cent compared to 7.2 per cent last year. This strong performance contributed to India maintaining its position as the world’s fastest-growing major economy. In comparison, China’s economy grew by 4.8 per cent during the same period.

However, agriculture growth slowed to 3.5 per cent from 4.1 per cent in the year-ago period. Experts noted that while farm output lagged, other sectors of the economy more than made up for it.

The National Statistics Office (NSO) reported that the real GDP for the first half of 2025-26 grew 8 per cent, up from 6.1 per cent in the same period last year. With this pace, India may surpass the annual growth target of 6.3-6.8 per cent for the financial year 2025-26, as projected in the Economic Survey earlier this year.

Experts like Aditi Nayar, Chief Economist at Icra, said the GDP growth exceeded expectations and showed a clear acceleration over the previous quarter. She also noted that the growth was supported by some discrepancies in data calculation, government spending, and capital formation.

Outlook and economic implications

Nominal GDP, which measures the economy at current prices, also showed strong growth. For Q2 2025-26, nominal GDP is estimated at Rs 85.25 lakh crore, up from Rs 78.40 lakh crore in the same period last year, showing an 8.7 per cent increase. Real GDP, adjusted for inflation, is estimated at Rs 48.63 lakh crore compared to Rs 44.94 lakh crore last year, reflecting the 8.2 per cent growth.

For the first half of the fiscal year, nominal GDP is estimated at Rs 171.30 lakh crore, growing 8.8 per cent, while real GDP stands at Rs 96.52 lakh crore, showing 8 per cent growth over the previous year. Gross Fixed Capital Formation (GFCF), which measures investment in infrastructure, machinery, and other capital assets, grew 7.3 per cent compared to 6.7 per cent in the same quarter last year.

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Economists say the strong growth is supported by festive-season spending and the momentum from the GST rate cut. Deloitte India economist Rumki Majumdar expects this trend to continue in the third quarter, which may lead to upward revisions in India’s full-year growth estimates.

However, there are challenges. The GDP deflator, which reflects changes in prices across the economy, has fallen to its lowest level since 2019. While this keeps inflation low, it could affect key ratios tied to nominal GDP, including fiscal deficit, government debt, and the current account. Experts warn that meeting fiscal deficit targets may become more difficult.

Icra’s Aditi Nayar also noted potential risks from global factors, such as US tariffs, which could impact exports and slow down some sectors of the economy. She added that government spending is limited compared to the budget estimates, which may affect the pace of growth in the coming quarters.

Despite these challenges, India’s GDP performance in Q2 2025-26 signals a strong start to the year. The combination of robust manufacturing, strong services growth, and consumption driven by GST cuts and festive demand has created a positive economic environment. This growth reinforces India’s position as a key player in the global economy and shows resilience despite challenges in agriculture and international trade.

Overall, the data suggests that India’s economy is well-positioned to maintain strong growth through the rest of the financial year. Analysts recommend continued support for manufacturing, services, and investment sectors, along with careful monitoring of inflation and fiscal targets, to sustain this momentum.