Indian economy enters second half of FY26 on stable footing: Finance Ministry

Q2 GDP data to be released today.

New Delhi: After posting better-than-expected growth of 7.8 per cent in the first quarter and projected expansion of around 7 per cent in July-September period, the Union Finance Ministry on Thursday said the Indian economy has entered the second half of the 2025-26 on a stable footing, anchored by well-contained inflation, resilient domestic demand.

Referring to independent economic assessments, the Finance Ministry noted in its monthly economic review that the gross domestic product (GDP) growth in the July-September quarter was likely in the range of 7 to 7.5 per cent.

The National Statistics Office (NSO) is scheduled to release the quarterly estimates of GDP for the second quarter of the current financial year on Friday.

“Macroeconomic developments in October 2025 indicate a stable and resilient domestic economy, supported by easing price pressures, firm consumption trends and the early impact of recent policy interventions,” the report prepared by the Department of Economic Affairs noted.

“Overall, the economy enters the second half of FY26 on a stable footing, anchored by well-contained inflation, resilient domestic demand and supportive policy dynamics, even as global uncertainties warrant continued vigilance,” it said.

The report noted that the reduction in the goods and services tax (GST), which came into effect from September 22, has boosted economic activities.

It is reflected in the performance of various high-frequency indicators. E-way bill generation expanded by 14.4 per cent during September and October 2025 on a year-on-year basis. At the same time, cumulative GST collection growth of nine per cent for Apr–Oct 2025 indicates that the underlying revenue stream has remained resilient, aided by firm consumption and improved compliance, the report noted.

"India’s GST discussion is now gradually moving from ‘revenue protection’ to ‘growth enablement.’ The October data validates that a streamlined and rationalised GST rate structure can simultaneously support consumption, compliance, and fiscal stability. It marks an important step toward a more efficient and growth-oriented GST 2.0 framework," said Ranjeet Mahtani, Partner, Dhruva Advisors.

"Indicators such as e-way bills numbers, auto and two-wheeler sales, tractor demand, and UPI transaction values all point to a measurable and broad-based lift in consumer activity following the rationalisation," Mahtani said. 

Most analysts expect that the Q2 GDP numbers may outshine the Reserve Bank of India's forecast of 7 per cent. 

In its 'Economy Watch November 2025' report released on Thursday, EY India said the Q2 growth is likely to come above 7 per cent.

The RBI has projected the second half of FY26 growth at 6.3 per cent. Combining these three growth numbers, the annual growth for FY26 may turn out to be 6.8 per cent or marginally higher, D.K. Srivastava, Chief Policy Advisor, EY India, noted in the report.

“In the medium to long term, India may maintain a real investment (GFCF) rate of about 35 per cent of GDP so that a real GDP growth in the range of 6.5 to 7 per cent can be achieved on a sustained basis. This implies an increase of 1.3 percentage points in the GFCF rate from 33.7 per cent in FY25 and only 0.4 percentage points from 34.6 per cent in 1Q FY26,” Srivastava said.