India's economy continued its strong momentum in Q2 FY2025-26 (July-September), with GDP growth coming in at 8.2%, beating estimates and marking one of the best quarterly performances in recent years. With this, India remains one of the fastest-growing economies in the world.

Economists have hailed the growth numbers, saying India's domestic demand, strong manufacturing and construction industry, and broad-based sectoral strength have led to India clocking in robust numbers in the second quarter of the fiscal year. Amid the strong Q2 FY26 GDP numbers, economist and ratings agencies are hopeful that the Indian economy will post strong numbers in the full fiscal year as well, prompting many to raise their FY26 projections. Let's have a look:

GDP numbers stronger than expected: Deloitte India

India’s Q2 FY2025-26 GDP growth came in stronger than expected at 8.2% year-on-year, says Rumki Majumdar, Economist, Deloitte India, adding that with festive season spending and the momentum from GST 2.0 likely to support activity in Q3, we anticipate a significant upward revision to full-year growth estimates.

"Government capex has been strong at 55.2% of the target for this FY. Robust consumer demand and capacity utilisation nearing 75% point to a compelling opportunity for private investment in India. Upcoming trade agreements with the U.S. and the EU are poised to further lift investor sentiment, creating an environment ripe for businesses to deploy capital and fuel the next phase of growth."

She said manufacturing (9.1%) and construction (7.2%) have delivered stronger-than-expected performance, demonstrating resilience even amid monsoon-related disruptions. "This momentum underscores the robustness of India’s industrial base and its ability to sustain growth despite seasonal challenges. There could have been an impact from ramping up manufacturing to meet the expected high festive demand following the announcement of GST cuts."

The Deloitte India economist said the RBI faces a delicate decision at the December MPC meeting. "While a rate cut was anticipated, strong growth alongside low inflation reduces the likelihood of one this quarter. The central bank may instead wait until February, when Q4 growth is expected to moderate, to recalibrate policy.”

India’s GDP growth significantly surpassed expectations: ICRA

Nayar attributed the upside surprise in the Q2 GDP growth print to strong services output, even as the agriculture and industrial sectors largely reported prints along expected lines.

"The 9.7% surge in the public administration, defence and other services segment in Q2 FY2026 was quite surprising given that the government of India's (GoI’s) non-interest revenue expenditure had contracted by a sharp 11.2% YoY in the quarter, as against the 6.9% uptick seen in Q1 FY2026," said Aditi Nayar, Chief Economist, ICRA.

Besides, the YoY growth in the combined non-interest revenue expenditure of 22 state governments halved to 5.3% in Q2 FY2026 from 10.9% in Q1 FY2026. She said it suggests that the other services, which include segments like health, education, recreation and other personal services, are likely to have outperformed in the quarter.

"Manufacturing growth is expectedly to be printed at a strong 9.1% in Q2, up from 7.7% in Q1, aided by an uptick in volume growth as reflected in the manufacturing IIP data, as well as a favourable base. The latter also supported an improvement in the electricity and mining prices relative to Q1. Construction growth cooled slightly, while remaining above the 7% mark for the 12th consecutive quarter."

As a downside, Nayar said that an adverse base, the potential negative impact of US tariffs and limited headroom for capital spending by the Government of India (vis-à-vis the Budget estimates) might dampen the pace of growth from the robust 8% seen in H1 FY2026. "Nevertheless, the FY2026 real GDP expansion now appears set to materially exceed 7%. With the Q2 FY2026 GDP growth exceeding  8%, the probability of a rate cut in the December 2025 MPC review has certainly eased, notwithstanding the series-low CPI inflation print for October 2025."

FY26 GDP growth may exceed 7% forecast: Ind-Ra

The ratings agency, in its comment on Q2 GDP, said the Reserve Bank of India (RBI) may go for monetary easing of 25-50bp in the rest of FY26 to support nominal GDP growth, and that the GDP growth in FY26 might exceed Ind-Ra’s forecast of 7.0%. Devendra Kumar Pant, Chief Economist, India Ratings and Research, said while the base effect has helped (Q2 FY25 growth: 5.6%) in strong GDP numbers to a certain extent this time, the strong growth momentum in agriculture, manufacturing, financial, real estate & professional services, public administration, defence and other services has helped GVA growth in 2QFY26 to eight-quarters high (8.1%).

Notably, the agriculture grew 3.5% in 2QFY26, the fifth quarter of more than 3.5% growth. Strong agriculture growth and decline in inflation is getting reflected in strong rural consumption growth and have brightened the scope of strong consumption growth in 2HFY26 as well, and are expected to continue at least in 1HFY27.

"From the demand side, both consumption and investment demand had remained strong in 2QFY26 as well and grew more than 7.0% in 2QFY26. Impact of tariff has started reflecting in exports growth, which grew 5.6% in 2QFY26 on a week base on 3.0% growth in 2QFY25; on the other hand, imports grew 12.8% in 2QFY26. Net taxes on products (production taxes net of production subsidies) grew 9.5% and supported 2QFY26 growth," said Pant.

Speaking about lower inflation, he said it's good for consumers, as it makes FY26 fiscal arithmetic difficult. "Sustained decline in inflation has brightened the scope for high consumption demand despite tariff-related issues. Strong real growth and weak nominal growth make monetary policy decisions difficult, while strong 8.0% growth in 1HFY26 does not support the argument for monetary easing; however, weak inflation and nominal GDP growth in 1HFY26 are much lower than the budgeted GDP growth, making a case for monetary easing."

After strong Q2, Crisil raises India's fiscal 2026 GDP forecast

Crisil has also raised India's fiscal 2026 GDP forecast to 7% after the Indian economy clocked 8% GDP growth in the first half of the fiscal year. India’s real GDP growth at 8.2% in the second quarter exceeded expectations, but the nominal print was modest at 8.7%. The difference between real and nominal is the smallest since the third quarter of fiscal 2020.

Dharmakirti Joshi, Chief Economist, Crisil, said private consumption was the main driver of higher real growth. "From the supply side, manufacturing and services saw a significant rise. There was a prop from statistical low-base effect as well, as the economy grew at a below-average 5.6% in the same quarter last fiscal," he said.

He believes the third quarter is expected to continue benefiting from some of these tailwinds. "While government investment will likely stabilise, there are hints of a belated uptick in private investments."

Joshi attributed the rationalisation of—and reduction in—the goods and services tax (GST) rates to a boost in private consumption, complementing reduced income tax and interest rate cuts. "We have raised our forecast of India’s GDP growth for this fiscal to 7%, up from 6.5%. This follows a first-half growth of 8% and an expected slowdown to 6.1% in the second half owing to the impact of higher US tariffs and normalisation of government capital expenditure."

He, however, said that while the increase in real GDP is encouraging, the slower nominal growth resulting from a significant decline in inflation could have adverse implications. "For instance, it complicates the achievement of tax targets, which are based on a nominal growth assumption of 10.1% for the current fiscal year."