Indian economy on track to hit $4 trillion as Q2 growth touches 8.2%

New Delhi: India’s economy grew by a stronger-than-expected 8.2% in the July–September quarter—its fastest pace in a year and a half—helped by a surge in production ahead of a major GST rate cut. This rise in consumer demand helped cushion the impact of steep U.S. tariffs on Indian exports.

The latest GDP numbers, released Friday, follow a 7.8% expansion in April–June and keep India positioned as the world’s fastest-growing major economy. The data also precede the annual festival-driven spending boost triggered by the GST reduction that took effect on September 22. The figures do not yet capture the full effect of the additional 25% US tariff imposed in August, which pushed the total duty to 50%, reported PTI.

India’s growth far outpaced China’s 4.8% for the same period. The expansion was supported by increased public investment, strong services activity, higher industrial output, resilient consumption, and the statistical advantage of a low base, as GDP grew only 5.6% in the corresponding quarter last year. Softer inflation, reflected in a subdued GDP deflator and lower CPI and WPI readings, also encouraged discretionary spending.

Prime Minister Narendra Modi welcomed the numbers, calling them “very encouraging” and highlighting the government’s reform efforts and pro-growth policies.

Following Modi’s Independence Day announcement of GST reductions, manufacturers ramped up output to meet expected festive-season demand. Private consumption—around 57% of GDP—rose 7.9% in Q2, up from 7% in Q1, according to the National Statistics Office.

Manufacturing grew 9.1%, construction rose 7.2%, while government expenditure fell 2.7% after strong growth in the previous quarter. Finance Minister Nirmala Sitharaman said the results show that reforms and fiscal consolidation continue to strengthen the economy’s momentum.

Chief Economic Adviser V Anantha Nageswaran said India is on track to surpass USD 4 trillion in GDP this fiscal year, with full-year growth expected to reach 7% or higher. He noted that the third quarter has begun on a solid note, supported by strong rural demand and improving urban consumption after the GST cut.

While real GDP expanded 8.2%, nominal growth was 8.7%, marking the narrowest gap between the two since late 2019. Analysts expect Q3 to benefit from the low base effect, a favourable deflator, and boosted consumption due to GST, income tax relief, and lower interest rates driven by RBI policy cuts.

Economists offered mixed assessments. Crisil’s Dharmakirti Joshi said upcoming revisions to the GDP base year—shifting to 2022–23—could alter existing estimates. DBS economist Radhika Rao noted that nominal GDP remains below targeted levels, posing a challenge for the RBI as it weighs rate cuts amid strong growth and low inflation. Kotak Mahindra Bank’s Upasna Bhardwaj said muted nominal growth indicates underlying weakness, reinforcing expectations of a 25-bps rate cut.

Vedanta chairman Anil Agarwal described India’s performance as “amazingly resilient,” saying domestic demand and deregulation could help push growth into double digits.

The Ministry of Statistics confirmed it is updating the base year for the National Accounts from 2011–12 to 2022–23. As a result, quarterly GDP figures will be revised to reflect updated data sources and methodology. The first GDP estimate using the new series will be released on February 27, 2026.