India’s GDP data points to a strong growth trend in FY26

Growth Outlook for FY26

India’s economic trajectory remains strong, with current indicators pointing to GDP growth of 7% or higher in FY26. Economic activity in the third quarter has started on firm ground, reflecting sustained momentum from the first half of the fiscal year. Based on current trends, the economy is projected to cross the $4 trillion mark before the end of FY26, highlighting India’s increasing economic weight in global markets.

Q2 Performance Highlights

The July–September quarter delivered strong performance, with real GDP expanding 8.2% compared with 5.6% in the same period last year. This also surpassed 7.8% growth recorded in the first quarter of FY26, signalling continuous acceleration. Real GDP for the second quarter stood at ₹48.63 trillion, while nominal GDP reached ₹85.25 trillion, marking an 8.7% year-on-year increase.

Sector-Wise Growth Drivers

Industry and services led the expansion in Q2. Manufacturing grew by 9.1%, while construction rose by 7.2%, supported by infrastructure projects and improved business confidence. The services sector recorded significant momentum, with financial, real estate, and professional services rising 10.2%. Overall, the tertiary sector grew 9.2%, emerging as a major economic engine. Agriculture posted moderate growth of 3.5%, and the utilities sector registered 4.4% growth.

Real GVA Gains

Real Gross Value Added (GVA) for Q2 increased 8.1%, reaching ₹44.77 trillion, compared with ₹41.41 trillion in the same period last year. The broad-based growth in industry and services contributed to the rise in GVA. Manufacturing efficiency and higher service-sector demand supported overall value creation, while agriculture remained comparatively subdued due to seasonal variations.

Demand Conditions

Rural demand has remained resilient, supported by steady agricultural activity and consumption patterns. Urban demand is strengthening, aided by recent reductions in GST rates, higher disposable incomes, and improving employment outlook. This combination of rural stability and urban revival has helped create balanced consumption demand across the economy.

Challenges and External Risks

Despite strong domestic fundamentals, external risks continue to shape the outlook. Global geopolitical tensions may impact cross-border capital flows and investment decisions. Uncertainty in international markets, trade routes, and energy prices poses additional challenges. These risks may influence business sentiment and investment planning in the short term.

Economic Outlook

Current growth patterns suggest that India is on track for another year of strong performance. Forecasts from major international institutions indicate growth above 6.5%, further strengthening expectations for FY26. If the current trajectory continues, India’s economy is positioned to exceed 7% GDP growth and cross $4 trillion in total size, reinforcing its status as one of the fastest-growing major economies.