Q2 GDP growth trumps tariffs, jumps to 8.2%

India’s economic growth rose to a six-quarter high of 8.2% in July-September period, exceeding most estimates by a wide margin, boosted by low inflation, strong domestic demands and government expenditure, the National Statistics Office (NSO) data showed on Friday.

The manufacturing sector posted an impressive 9.1% expansion in the three-month period ended September as against a tepid 2.2% growth recorded in the corresponding period of the last year.

The services sector posted 9.2% growth, led by 10.2% expansion in financial, real estate and professional services. However, agriculture and allied activities posted a moderated growth of 3.5%.

The Indian economy has beaten forecasts in the first two quarters despite tariffs imposed by the Donald Trump administration. The country’s gross domestic product (GDP) grew by 7.8% in the April-June quarter. The average growth in the first half of the year stands at 8%.

The Q2 number is much higher than the Reserve Bank of India’s estimate of 7%. Other major institutions had also pegged it in the range of 7 to 7.5%.

Buoyed by the better-than-expected numbers in the first half, Chief Economic Adviser V Anantha Nageswaran said the full-year growth is likely to be more than 7%, beating the 6.3-6.8% projection given by the Economic Survey.

With this rate of expansion, according to Nageswaran, the economy would cross the $4-trillion mark in the current financial year. “In the current uncertain global environment, the Indian economy does stand out as a relative oasis of tranquillity, stability and growth,” he told reporters.

Prime Minister Narendra Modi termed the GDP growth data very encouraging. “It reflects the impact of our pro-growth policies and reforms. It also reflects the hard work and enterprise of our people. Our government will continue to advance reforms and strengthen Ease of Living for every citizen,” Modi said in a post on X.

Finance Minister Nirmala Sitharaman said the growth has been driven by “sustained fiscal consolidation, targeted public investment, and various reforms that have strengthened productivity and improved ease of doing business”.

India’s nominal GDP in Q2 of 2025-26 is estimated at Rs 85.25 lakh crore against Rs 78.40 lakh crore in the corresponding period of the last year, registering a growth of 8.7%. The real GDP grew by 8.2% to Rs 48.63 lakh crore. The gap between real and nominal GDP, which was 12 percentage points in Q1 of FY23, dropped sharply to 0.5 percentage points in Q2 FY26.

This reflects the sharp decline in inflation. The gross value added (GVA) growth rose to a seven-quarter high of 8.1%, signaling broad-based strength across sectors. The gap between GDP and GVA growth has also narrowed, which reflects improved alignment in economic activity, both from the demand and supply sides, and tax collections, analysts said.

“India’s GDP deflator has fallen to its lowest level since 2019, pulling down nominal GDP growth. This poses challenges for key ratios tied to nominal GDP, such as fiscal deficit, debt and current account. It will be harder for the government to meet its fiscal deficit targets, which are measured as a percentage of GDP,” said Rumki Majumdar, Economist at Deloitte India.

Anish Shah, Group CEO & MD, Mahindra Group, said the strong Q2 growth underscores the economy’s inherent resilience and the depth of domestic demand. “Even amid headwinds such as US tariffs, our manufacturing and services sectors have demonstrated extraordinary adaptability and momentum. This performance reaffirms India’s position as the world’s fastest-growing major economy,” he added.

“India’s economy is amazingly resilient. At a time of global headwinds, a growth rate of over 8% is impressive. Domestic demand and deregulation can take it to double digits. We are continuously strengthening our position as world’s fastest growing major economy,” said Vedanta Group chairman Anil Agarwal.