India Achieves 8.2% GDP Growth in Q2 FY25-26: Maintains Status as World's Fastest Growing Major Economy

India's economy has achieved an impressive 8.2 percent growth rate in the July-September quarter, marking its fastest expansion in six quarters. This remarkable performance, which outpaces China's 4.8 percent, has reinforced India's position as the world's fastest-growing major economy, according to official data released on Friday.

This robust growth follows a strong 7.8 percent expansion in the April-June quarter. Economic analysts attribute this exceptional performance to several factors, including front-loaded production in anticipation of GST rate cuts, which stimulated consumption and helped counterbalance the impact of substantial US tariffs.

The GDP growth announcement came before the traditional festive season consumption boost, riding on the implementation of significant reductions in goods and services tax (GST). However, the data does not fully reflect the quarter-long impact of the additional 25 percent punitive tariff on Indian exports that raised the total levy to 50 percent in August.

Several key drivers propelled this economic expansion, including increased public investments, robust demand for services, improved industrial output, and steady consumption. Statistical effects from a low base period also contributed, as the economy had grown at a below-average 5.6 percent during the same quarter in the previous fiscal year.

The economic growth also benefited from a low GDP deflator that provided some buoyancy. Inflation measured by both the Consumer Price Index and Wholesale Price Index was lower in the second quarter compared to the first. Reduced food inflation enabled more discretionary consumer spending.

Prime Minister Narendra Modi characterized the GDP growth as "very encouraging" on social media platform X. He stated, "It reflects the impact of our pro-growth policies and reforms. It also reflects the hard work and enterprise of our people. Our government will continue to advance reforms and strengthen Ease of Living for every citizen."

Following the GST rate cut announcement in Modi's Independence Day address, manufacturers accelerated production to meet festival season demand. The GST rate reduction became effective on September 22.

Private consumer spending, which constitutes approximately 57 percent of GDP, increased by 7.9 percent in July-September—the second quarter of the current 2025-26 fiscal year—compared to a 7 percent rise in the previous quarter, according to National Statistics Office (NSO) data.

Manufacturing output demonstrated strong growth at 9.1 percent, improving from 7.7 percent in the preceding quarter and 7.6 percent in the same period last year. The construction sector expanded by 7.2 percent, slightly down from 7.6 percent in the previous quarter. Government expenditure decelerated, decreasing by 2.7 percent in Q2, contrasting with a 7.4 percent growth in the prior quarter.

Finance Minister Nirmala Sitharaman highlighted that the GDP figures demonstrate how reforms and fiscal consolidation have driven the Indian economy's robust growth and momentum. "Various high-frequency indicators also point to continued economic momentum and broad-based consumption growth," she noted in a social media post.

Sitharaman further emphasized that the GDP estimates "show the robust economic growth and momentum of the Indian economy. With a Real GDP growth rate of 8.2 percent for Q2 - FY 2025-26 (July-September), India is the world's fastest-growing major economy." She attributed this achievement to sustained fiscal consolidation, targeted public investment, and various reforms that have enhanced productivity and improved business conditions.

Chief Economic Adviser V Anantha Nageswaran predicted that, given the current growth trajectory, the Indian economy is expected to surpass USD 4 trillion in the current fiscal year. India's GDP reached USD 3.9 trillion in FY25, which concluded on March 31.

With India's economy recording an 8 percent growth rate in the first half of the current financial year, Nageswaran projected the full-year GDP growth outlook at 7 percent or higher. He noted that the third quarter (October-December) has begun on solid footing, with rural demand remaining resilient while urban demand gains momentum following the GST rate reduction.

Although the real GDP growth of 8.2 percent in the second quarter exceeded expectations, the nominal figure was more modest at 8.7 percent. This represents the smallest difference between real and nominal GDP since the third quarter of fiscal 2020.

The third quarter is anticipated to continue benefiting from a low base and favorable deflator. Additionally, the GST rate cut has strengthened private consumption, complementing the effects of reduced income tax and interest rate cuts resulting from RBI repo rate reductions.

Dharmakirti Joshi, Chief Economist at Crisil Ltd, mentioned that the GDP series is being revised to a new base year of 2022-23 from 2011-12, which will provide a more accurate economic picture but may lead to deviations from current estimates.

DBS Bank economist Radhika Rao observed that the impact of the deflator and low base was reflected in the sub-9 percent nominal GDP, which is running below the budgeted pace. She noted that the RBI faces a challenging decision at the December rate review, given the combination of strong growth and record-low inflation. "We expect an emphasis on forward-looking growth guidance and a high real rate buffer due to weak inflation, to justify a move to lower rates further."

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, pointed out that the single-digit nominal GDP growth continues to indicate tepid underlying economic activity. "Despite the high real GDP growth, we retain our expectations of a 25 bps rate cut in the upcoming policy as the inflation trajectory remains benign."

Vedanta Chairman Anil Agarwal characterized the GDP growth as evidence that India's economy is "amazingly resilient." He stated, "At a time of global headwinds, a growth rate of over 8 percent is very impressive. Domestic demand and deregulation can take it to double digits. We are continuously strengthening our position as the world's fastest-growing major economy."

The Ministry of Statistics and Programme Implementation is currently revising the National Accounts base year from 2011-12 (Current Series) to 2022-23 (New Series). Consequently, the quarterly estimates will undergo revisions due to changes in estimation methodology at current and constant prices, incorporation of updated data sources, and annual benchmark updates. The ministry advised users to consider these factors when interpreting subsequent revised estimates, noting that the next quarterly GDP estimates based on the New Series will be released on February 27, 2026.