Strong consumption and robust manufacturing activity were the primary drivers of the growth momentum.
New Delhi : India’s economy surged to its fastest growth rate in six quarters during July–September 2025, underscoring the resilience of the world’s fourth-largest economy even as it faces significant trade pressure from steep tariffs imposed by the United States President Donald Trump. According to data released by the National Statistical Office on Friday, GDP growth accelerated to 8.2% in the second quarter of FY26, up from 7.8% in Q1 and 5.4% a year earlier. The figure far surpassed market expectations, with Reuters’ economists projecting 7.3%, while SBI Research and Bloomberg estimated 7.5% and 7.4%, respectively.
Strong consumption and robust manufacturing activity were the primary drivers of the growth momentum. Private consumption rose 7.9% year-on-year, compared to 7% in the previous quarter. Manufacturing output jumped 9.1%, reflecting a sharp pickup from 7.7% in Q1. Construction activity expanded 7.2%, slightly lower than the previous quarter’s 7.6%. One area of concern, however, was government expenditure, which contracted 2.7% year-on-year after rising 7.4% in Q1.
Madhavi Arora, chief economist at Emkay Global Financial Services, said the growth figure was boosted by favourable deflator effects, the lagged impact of monetary and regulatory easing, and a limited fallout from the US tariffs on Indian exports. She added that some of these supportive factors may continue into Q3, alongside improving consumer demand, helping FY26 growth remain close to the 7% mark.
The resilience comes despite major external and domestic policy shifts. On 23 August, the US slapped 50% tariffs on Indian exports, citing India’s import barriers and its purchase of Russian oil—an accusation Trump linked to Moscow’s war effort in Ukraine. Less than a month later, India rolled out GST 2.0 on 22 September, slashing taxes across hundreds of consumer products—from soaps to small cars—to stimulate domestic demand. The full impact of these measures is yet to reflect meaningfully in quarterly GDP data.
Meanwhile, inflation dropped to an unprecedented low of 0.25% in October 2025, even as India’s trade deficit widened to a record USD 41.68 billion due to declining shipments to the US. According to DBS Bank economist Radhika Rao, the Monetary Policy Committee faces a complex challenge in its December meeting, balancing robust growth with ultra-low inflation. She expects policymakers to emphasise forward-looking guidance and potentially justify further rate cuts given the high real interest rate environment.
Adding to the economic debate, the International Monetary Fund (IMF) has raised concerns about the quality of India’s national statistics. In its latest annual review, the IMF assigned India’s National Accounts data a ‘C’ grade—its second-lowest category—indicating what it described as “fundamental weaknesses” that do not meet the requirements for robust international surveillance. The downgrade, revealed just ahead of the release of Q2 GDP figures, has reportedly caused unease within New Delhi.
The IMF’s Article IV report also flags multiple issues with India’s GDP and GVA measurements. Opposition parties, which have long questioned the credibility of economic data since the Modi government took office, argue that the IMF’s assessment vindicates their concerns. For years, political majorities in Parliament limited the impact of such criticism, but the global scrutiny now puts the government under fresh pressure.
As India celebrates a sharp surge in growth amid global headwinds, the debate around transparency and reliability of economic data has resurfaced, setting the stage for both economic and political confrontation in the months ahead.
New Delhi : India’s economy surged to its fastest growth rate in six quarters during July–September 2025, underscoring the resilience of the world’s fourth-largest economy even as it faces significant trade pressure from steep tariffs imposed by the United States President Donald Trump. According to data released by the National Statistical Office on Friday, GDP growth accelerated to 8.2% in the second quarter of FY26, up from 7.8% in Q1 and 5.4% a year earlier. The figure far surpassed market expectations, with Reuters’ economists projecting 7.3%, while SBI Research and Bloomberg estimated 7.5% and 7.4%, respectively.
Strong consumption and robust manufacturing activity were the primary drivers of the growth momentum. Private consumption rose 7.9% year-on-year, compared to 7% in the previous quarter. Manufacturing output jumped 9.1%, reflecting a sharp pickup from 7.7% in Q1. Construction activity expanded 7.2%, slightly lower than the previous quarter’s 7.6%. One area of concern, however, was government expenditure, which contracted 2.7% year-on-year after rising 7.4% in Q1.
Madhavi Arora, chief economist at Emkay Global Financial Services, said the growth figure was boosted by favourable deflator effects, the lagged impact of monetary and regulatory easing, and a limited fallout from the US tariffs on Indian exports. She added that some of these supportive factors may continue into Q3, alongside improving consumer demand, helping FY26 growth remain close to the 7% mark.
The resilience comes despite major external and domestic policy shifts. On 23 August, the US slapped 50% tariffs on Indian exports, citing India’s import barriers and its purchase of Russian oil—an accusation Trump linked to Moscow’s war effort in Ukraine. Less than a month later, India rolled out GST 2.0 on 22 September, slashing taxes across hundreds of consumer products—from soaps to small cars—to stimulate domestic demand. The full impact of these measures is yet to reflect meaningfully in quarterly GDP data.
Meanwhile, inflation dropped to an unprecedented low of 0.25% in October 2025, even as India’s trade deficit widened to a record USD 41.68 billion due to declining shipments to the US. According to DBS Bank economist Radhika Rao, the Monetary Policy Committee faces a complex challenge in its December meeting, balancing robust growth with ultra-low inflation. She expects policymakers to emphasise forward-looking guidance and potentially justify further rate cuts given the high real interest rate environment.
Adding to the economic debate, the International Monetary Fund (IMF) has raised concerns about the quality of India’s national statistics. In its latest annual review, the IMF assigned India’s National Accounts data a ‘C’ grade—its second-lowest category—indicating what it described as “fundamental weaknesses” that do not meet the requirements for robust international surveillance. The downgrade, revealed just ahead of the release of Q2 GDP figures, has reportedly caused unease within New Delhi.
The IMF’s Article IV report also flags multiple issues with India’s GDP and GVA measurements. Opposition parties, which have long questioned the credibility of economic data since the Modi government took office, argue that the IMF’s assessment vindicates their concerns. For years, political majorities in Parliament limited the impact of such criticism, but the global scrutiny now puts the government under fresh pressure.
As India celebrates a sharp surge in growth amid global headwinds, the debate around transparency and reliability of economic data has resurfaced, setting the stage for both economic and political confrontation in the months ahead.
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