India's Economic Engine Roars with 7.5% Q2 Growth
India's economy is demonstrating remarkable strength, with the latest projections indicating robust 7.5 percent GDP growth for the second quarter of fiscal year 2026. According to State Bank of India's research division, this impressive performance continues India's outperformance compared to major global economies.
The RBI's Monetary Policy Conundrum
While growth numbers sparkle, SBI Research has raised critical questions about the Reserve Bank of India's timing for potential rate cuts. The report suggests the central bank may have missed the optimal window for a pre-emptive rate cut between June and October 2025.
The research highlights that with inflation remaining below 4 percent since February 2025 and expected to stay subdued through much of FY27, the RBI's decision to maintain status quo in October substantially narrowed its tactical flexibility. SBI describes this situation as a double whammy for the Monetary Policy Committee.
Internal estimates from SBI project Q1 FY27 inflation could slip below 3 percent, significantly lower than the RBI's earlier projection of 4.9 percent, which was later revised to 4.5 percent in October.
Sector-Wide Momentum Fuels Expansion
The growth story extends across multiple sectors, with 83 percent of leading indicators showing demand strength in Q2 FY26, up from 70 percent in the previous quarter. The revival stems from several key factors:
Investment activity has picked up significantly, while rural consumption shows strengthening trends. The GST rationalization measures provided a substantial boost to festive spending across sectors, creating what SBI describes as the triumph of hope over hype.
The research house maintains its full-year GDP outlook at 7.2–7.3 percent, reflecting confidence in India's sustained economic momentum.
GST Collections Reflect Economic Vitality
On the fiscal front, SBI estimates gross domestic GST collections for November 2025 could reach ₹1.49 lakh crore, marking a 6.8 percent year-on-year increase. When including IGST and cess from imports, total receipts might cross the significant milestone of ₹2 lakh crore.
This surge is attributed to peak festive demand, lower GST rates, and improved compliance, with most states expected to record positive gains.
The upcoming December policy meeting presents a close call for the RBI, with SBI emphasizing that any decision to cut rates must be accompanied by strong communication, particularly since growth continues to run above 7 percent.
