New Delhi: The Indian economy demonstrated remarkable resilience and momentum in the second quarter (Q2: July-September) of the financial year 2025-26, with the Gross Domestic Product (GDP) expanding by a robust 8.2% year-on-year (y/y).

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This figure, released by the National Statistical Office (NSO), marks a significant acceleration from the 7.8% growth recorded in Q1 and substantially exceeded the market consensus forecast, which typically ranged between 7.0% and 7.3%. The data firmly cements India’s status as the fastest-growing major economy globally.

Sectoral Analysis: Key Contributors to Gross Value Added (GVA)

 

The robust GDP print was primarily driven by the Secondary and Tertiary (Services) sectors, compensating for a more moderate performance in the Primary sector.

Sectoral Classification (GVA)	Q2 FY26 Growth (Y/Y)	Q2 FY25 Growth (Y/Y)	Key Observation
Secondary Sector	8.1%	4.0%	Sharp acceleration driven by manufacturing.
Manufacturing	9.1%	2.2%	Pre-festive inventory build-up and strong production.
Construction	7.2%	N/A	Supported by sustained government capital expenditure.
Tertiary Sector	9.2%	7.4%	Broad-based growth, led by financial services.
Financial, Real Estate & Professional Services	10.2%	7.2%	Highest contributor, reflecting strong credit and asset market activity.
Primary Sector	3.1%	3.5%	Growth moderated slightly due to factors in the agriculture and mining segments.

The Manufacturing sector‘s surge to 9.1% (from 2.2% last year) was a crucial factor, reflecting strong factory activity and an anticipatory build-up of stocks ahead of the festival season. Equally important was the Tertiary sector‘s 9.2% growth, spearheaded by a 10.2% expansion in Financial, Real Estate, and Professional Services.

Expenditure Components and Demand Drivers

 

The demand side of the economy showed a sustained buoyancy, supported by both public and private consumption:

• Government Capital Expenditure: Elevated spending by the Central Government on infrastructure continued to provide a significant boost to construction and related industries.

• Private Final Consumption Expenditure (PFCE): Accounting for roughly 60% of GDP, PFCE reported a 7.9% growth rate, indicating a firming up of both urban and rural demand. This improvement in consumption was supported by a resilient rural economy and the lagged impact of recent policy measures, including rationalisation of the Goods and Services Tax (GST) rates.

• Exports: Early export shipments, potentially front-loaded to mitigate the impact of anticipated international trade tariffs, contributed positively to the quarterly figures.

Macroeconomic Implications and Outlook

 

The surprisingly strong Q2 performance provides significant operational comfort to policymakers, though it also introduces new dynamics for the remainder of the fiscal year:

1. Monetary Policy: The higher-than-expected GDP growth may influence the Reserve Bank of India’s (RBI) monetary policy stance. While the focus remains on inflation control, the strong growth print reduces the near-term pressure for an aggressive rate cut cycle.

2. Fiscal Management: The higher real GDP growth is positive for the government’s fiscal health, as it is expected to translate into better-than-budgeted tax collections. However, the accompanying Nominal GDP growth remains a point of observation, as a sharp slowdown in the nominal rate can complicate fiscal calculations.

3. Future Momentum: While H1 FY26 growth stands at a robust 8.0%, economists caution that the second half (H2) may see some moderation. This is primarily due to the fading of favourable statistical base effects and the gradual reflection of global trade headwinds and higher US tariffs.

In summary, the 8.2% growth rate in Q2 FY26 underscores the structural strength and domestic demand resilience of the Indian economy. The immediate focus will be on converting the sustained public capital expenditure into a definitive cycle of private sector investment to ensure high growth remains durable.