India’s Gross Domestic Product (GDP) growth rate has once again surpassed all estimates. The data for the second quarter (July to September) of the financial year 2026 is coming soon and economists expect the GDP growth rate to be between 7% to 8%. This is much higher than the Reserve Bank of India (RBI) estimate of 7%. Even in the first quarter, GDP stood at 7.8%, which was the highest in the last 5 quarters.
What is the secret of the ‘fast pace’ of GDP?
The fast growth of GDP is considered a good sign for the market and it is expected that it will increase the income of the people. But this time, instead of real growth, the focus is on ‘nominal’ GDP, which is without adjusting for inflation. In the first quarter, this rate had fallen to 8.8%, which was the lowest level in three quarters. Experts believe that it may fall further to around 8% in the second quarter. This simply means that if inflation is taken out, the real pace of the economy is not as much as it appears.
Experts are considering some ‘statistical’ reasons as the main reasons behind this. This includes strong government spending, a favorable base effect compared to the previous quarter, and a low deflator. The good thing is that the full impact of the 50% tariff imposed by America on Indian goods was not visible in this quarter, because exporters already continued sending goods.
The return of the rural market is encouraging
Economists believe that the increasing demand of the general public has a major role behind this strong growth. According to Manoranjan Sharma, Chief Economist of Infomerics Ratings, there has been a tremendous increase in urban demand ahead of the festive season. Also, after several years of slowdown, a significant improvement has been seen in rural expenditure. This is a big relief, because consumption contributes 55% to 60% of the country’s GDP, and this engine is now gaining momentum again.
Economists at Union Bank of India have estimated GDP at 7.5% for Q2FY26. He also said that Gross Value Added (GVA) growth, which reflects the production side, may also increase to 7.3%. Namrata Mittal, Chief Economist of SBI Mutual Fund, believes that real GDP growth can go up to 8%, which is much higher than RBI’s estimate. He also says that government expenditure has provided strong support to this growth.
warning for the second half
However, despite such encouraging figures, experts have also given a warning. He says that the GDP figures in the second half of the financial year 2026 (October to March) may be slightly weak. The main reason for this is that the statistical factors which are currently increasing growth will gradually disappear. Additionally, the full impact of US tariffs due to the delay in the India-US trade agreement will also be visible in the numbers in the coming quarters. This nominal GDP growth slowing down is the main concern that policy makers will need to pay attention to. Let us tell you that the GDP figures for Q2FY26 are going to be released on Friday, 28 November.
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