The Indian economy has delivered a stellar performance in the second quarter of the current financial year, recording its fastest growth pace in six quarters. Official data released on Friday revealed the economy expanded by a robust 8.2%, significantly surpassing expectations and demonstrating remarkable resilience.
Surpassing All Expectations
The July-September growth figure of 8.2% substantially exceeded forecasts from multiple quarters. A Mint poll of 15 economists had projected growth at 7.2%, with individual estimates ranging between 7% and 7.7%. More notably, the actual growth outperformed the Reserve Bank of India's latest projection of 7% for the quarter by over one percentage point.
This represents a dramatic improvement from the same quarter last year, when GDP growth had slowed to 5.6%. The current performance also builds upon the 7.8% expansion recorded in the first quarter of FY26 and the 7.4% growth in Q4 of FY25.
Drivers of Economic Momentum
Multiple factors contributed to this impressive economic showing. The Ministry of Statistics & Programme Implementation highlighted strong manufacturing and consumption growth as primary drivers. Beyond these fundamental strengths, statistical effects including a low base from the previous year and subdued inflation conditions provided additional support.
Economist Yuvika Singhal from QuantEco Research identified several underlying factors boosting economic activity. "Softer inflation conditions, transmission of earlier monetary policy easing, and inventory build-up in some sectors in anticipation of festive season demand—amplified by the GST rate cuts—also contributed to increased economic activity in the quarter," she noted.
High-frequency indicators showed improved growth momentum even before the GST rate reductions took effect from September 22, indicating broad-based economic strength.
Implications for Monetary Policy
The unexpectedly strong growth performance has significant implications for the Reserve Bank of India's monetary policy stance. With growth surpassing the central bank's forecast by such a wide margin, the RBI may find it challenging to implement a rate cut in the December policy meeting, despite widespread anticipation among economists for a 25-basis-point easing.
The resilience shown by the economy, particularly amid global tariff-related uncertainties, provides the central bank with less impetus for immediate monetary stimulus. The RBI had projected growth of 6.8% for the full year, with 6.4% for Q3 and 6.2% for Q4.
Given the significant upside surprise in Q2 GDP growth, the central bank is likely to revise its forecasts upward at its next meeting scheduled for December 3-5, even if it maintains its second-half growth projections.
The outstanding Q2 performance positions India as one of the fastest-growing major economies globally and sets a positive tone for the remainder of the financial year, driven by continued festive demand and the beneficial effects of recent policy measures.
