India’s GDP Rockets to 8.2% in Q2 FY26

A Sharp Rebound Exceeding All Market Expectations

India’s economy expanded by an impressive 8.2% in the second quarter of FY26, surpassing all projections and marking the fastest growth in six quarters. This performance stands in sharp contrast to the 5.6% growth registered in the same period last fiscal year. Most analysts had predicted Q2 growth to fall between 7% and 7.5%, making the actual numbers a pleasant surprise.

Key Drivers Behind the Growth

Strong Momentum in Manufacturing

The standout contributor to this surge was the manufacturing sector, which grew at a remarkable 9.1%, a significant leap from the modest 2.2% seen a year ago. Economists note that this boost was partially driven by companies frontloading exports to the United States ahead of a planned 50% tariff hike, elevating production and export activity.

Construction and Services Continue to Power Ahead

The construction sector posted a solid 7.2% growth, reflecting ongoing infrastructure activity and robust real-estate demand.
The services sector, traditionally a backbone of the Indian economy, maintained its upward trajectory with 9.2% growth, an improvement from 7.2% recorded last year.

Consumption and Investments Maintain Strength

Private Consumption on the Rise

Household spending remained resilient, with private consumption rising 7.9%, up from 6.4% during the same quarter last year and higher than 7% in Q1. This indicates strengthening consumer confidence and expanding purchasing power, particularly in rural areas.

Healthy Capital Formation

Gross fixed capital formation, a key indicator of investment and asset creation, grew 7.3% — higher than last year’s 6.7%, though slightly lower than 7.8% in the previous quarter. This reflects continuous infrastructural development and steady investor confidence.

Expert Insights and Government Perspective

Chief Economic Advisor V. Anantha Nageswaran attributed the strong performance to a combination of stable inflation, consistent public capital expenditure, and ongoing structural reforms. He noted that India’s transition into a $4 trillion economy as early as next year is “not unrealistic,” underscoring growing optimism around long-term economic prospects.
The government also emphasized that GST rate reductions have played a key role in reducing the cost of goods and services, boosting consumption, and broadening the tax net.

Risks and Caution Flags

Despite the encouraging numbers, economists highlighted a potential challenge: slower nominal GDP growth. Nominal GDP rose 8.7% in Q2, reaching an estimated ₹85.25 lakh crore, prompting caution about future fiscal sustainability and revenue performance.

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Sorit Chaudhary

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