India’s economy experienced significant growth of 8.2% year-on-year in the July-September quarter, up from 7.8% in the previous quarter. This growth was driven by strong consumer spending and manufacturing, despite global trade challenges, including a new 25% tariff imposed by the U. S. on Indian exports, raising the total rate to 50%. Economists had predicted a lower growth rate of 7.3% for this quarter.
Madhavi Arora, Chief Economist at Emkay Global Financial Services, highlighted that growth exceeded expectations due to favorable statistical effects, regulatory easing, and minimal impact on exports. She suggests that this positive growth might continue into the next quarter, with expectations for the fiscal year 2026 GDP to be above 7%. Garima Kapoor of Elara Securities noted that government spending, especially on capital projects, also contributed to this high growth, predicting full-year GDP growth close to 7.5%.
Suvodeep Rakshit from Kotak Institutional Equities emphasized that while real GDP growth is strong, a low deflator affects nominal growth, signaling underlying economic challenges. He noted that subdued activity due to a change in GST rates impacted production and sales, but festive season demand could boost growth in the next quarter. Upasna Bhardwaj from Kotak Mahindra Bank remarked that although real GDP growth is robust, underlying economic activity appears soft, leading to expectations of a possible interest rate cut due to low inflation.
Sakshi Gupta from HDFC Bank pointed out that the effects of tariffs on exports are still uncertain, and the sustainability of festive demand remains in question. Devendra Pant from India Ratings noted that the growth was largely due to manufacturing, investment, and consumer demand, with decreasing inflation influencing nominal GDP growth.
Radha Rao from DBS Bank mentioned that the Monetary Policy Committee faces a complex situation with impressive growth and low inflation, suggesting the possibility of lower rates. Kunal Kundu from Societe Generale noted that despite strong performance, discrepancies in data reporting complicate analyses of growth sources.
Sujan Hajra from Anand Rathi highlighted that despite exceeding expectations, challenges like U. S. tariffs and limited government spending capacity may slow growth. Aditi Nayar from ICRA indicated that the robust Q2 results raise the likelihood of a rate cut easing, despite potential growth dampeners.
Rajeev Sharan from Brickwork Ratings pointed out that strong sectors such as manufacturing and services support India’s position as a leading global economy, with expectations of full-year growth near 7.2%. He stressed the need for ongoing structural reforms and investment to maintain credit strength amidst these developments.
With information from Reuters