Team SKM,
India’s economic growth is expected to accelerate to 7.3 percent in the July to September quarter of FY26, driven by resilient rural demand, higher government capital expenditure, and front-loaded exports. This is the median forecast from a poll of 12 economists, with estimates ranging between 6.9 percent and 7.7 percent. The National Statistical Office will release the official data on 28 November. The Reserve Bank of India has estimated Q2 growth at 7 percent.
GDP had expanded 7.8 percent in the first quarter, the strongest pace in five quarters. In the same quarter last year, growth was 5.6 percent.
Key Growth Drivers
Rural consumption improved through the quarter, supported by easing inflation, rising farm incomes and higher wage growth. Urban demand also strengthened, aided by stable interest rates and tax relief measures announced earlier in the year.
Industrial activity saw a broad-based pick-up. The Index of Industrial Production grew 4.1 percent on average during the quarter, compared with 2.7 percent a year earlier. Manufacturing output expanded 4.9 percent, up from 3.3 percent in the same period last year.
Government capital expenditure rose 31 percent in the quarter, continuing the investment-led growth push. Merchandise exports increased 8.8 percent, recovering from a 7 percent decline a year earlier as exporters advanced shipments ahead of tariff changes in the United States.
The GST rate shift to a simpler two-slab structure of 5 and 18 percent from 22 September also supported demand through pre-festive stocking.
Risks and Outlook
Economists expect full-year FY26 GDP growth to average 6.9 percent, with projections between 6.3 and 7.4 percent. The RBI forecast stands at 6.8 percent.
External risks remain. Higher US tariffs, delayed global demand recovery and uneven monsoon outcomes could affect the second half. The durability of consumption beyond the festive period will be a key variable, along with export momentum.
Multilateral agencies continue to place India’s growth above most major economies. The World Bank projects 6.5 percent GDP growth in FY26, while the IMF estimates 6.6 percent.
Implications for Clients
● Government-led capex remains the core growth engine, which supports infrastructure-linked businesses
● Export-facing firms may continue to see volatility due to tariff-related shifts
● Rural demand recovery strengthens the consumption outlook for broad-based goods and services
● Portfolio strategy must account for both domestic resilience and external risks