India’s Economy Strengthens in Q2: Growth Expected at 7.3%, Shows Polls

India’s economic momentum appears to have strengthened in the July–September quarter, with multiple surveys indicating that GDP may have expanded by around 7.3% in Q2 of FY26. This marks one of the strongest quarterly performances among major global economies and surpasses the Reserve Bank of India’s projection of 7%. A combination of favourable base effects, improved rural activity, and heightened government expenditure seems to be powering the expansion.

Indian economy logged another 7%+ rate in Q2 | Moneycontrol

Growth Drivers Behind the Strong Quarter

The higher growth estimate is partly supported by the low base of the same quarter last year, which was significantly weaker. This statistical advantage magnifies the year-on-year growth rate. However, underlying real activity also reflects improvement. Rural India, in particular, has shown visible signs of revival following a better kharif cropping season and steady monsoon progress, both of which have improved rural purchasing power and consumer sentiment.

Government capital expenditure has also emerged as a central engine of growth. Infrastructure investments, road construction, and public sector projects have injected liquidity and created consistent economic activity. Simultaneously, inflation has remained soft, allowing real consumption to strengthen. Analysts have noted that a favourable deflator is elevating real GDP figures, though this may also mask concerns around lower nominal growth.

Economic Outlook for FY26 and Key Trends

For the full fiscal year, most economists estimate GDP growth in the range of 6.8% to 7%, with a median projection of around 6.9%. While this keeps India firmly positioned as one of the fastest growing major economies, economists caution that sustained momentum will depend on broader sectoral participation. Urban consumption continues to show mixed trends, with strong spending in the services sector but weakening sales in certain durable goods categories.

Another area of concern is the investment cycle. Public expenditure remains strong, but private capital formation has not yet recovered to pre-pandemic vigour. Many experts argue that for India to maintain long-term high growth, private sector investment must accelerate and complement government efforts. Additionally, global uncertainties, volatile export demand and geopolitical risks continue to weigh on India’s external sector performance.

Structural Considerations and Data Challenges

Economists also highlight the ongoing changes in India’s GDP estimation process, as the government prepares for a major methodological revision ahead of 2026. This could significantly reshape how growth is measured and analysed. Ahead of the revision, analysts expect statistical noise and deflator-related distortions to remain a challenge when interpreting growth data. Lower nominal growth, despite strong real GDP numbers, also raises concerns over tax revenue expansion and fiscal headroom.

What Lies Ahead

Going forward, the durability of India’s growth cycle will depend on several interlinked factors: urban consumption behaviour, progress in boosting exports, revival of private investment, and stability in global demand. The upcoming quarters will be crucial in determining whether the current momentum can be sustained or whether it will taper as temporary factors fade.

The MGMM Outlook

India’s projected 7.3% GDP growth in Q2 reflects a strengthening economy that continues to outperform global markets, and from our viewpoint, this reinforces India’s rising confidence under a stable economic framework. The revival of rural activity, driven by a strong kharif season and steady monsoons, shows how deeply the country’s growth is anchored in grassroots development rather than just urban cycles. Government-led capital expenditure—especially in infrastructure—has become a powerful engine ensuring liquidity, employment, and long-term national capacity-building. Softening inflation has further boosted real consumption, helping ordinary citizens experience the benefit of growth rather than merely seeing it in numbers.

At the same time, the broader picture shows areas demanding sharper focus. Private investment still lags behind public spending, and for India to achieve a truly sustained high-growth era, the corporate sector must accelerate its participation. Global uncertainties and fluctuating export demand also pose risks that policymakers must navigate carefully. While headline figures highlight a strong, resilient India, deeper structural reforms and diversification of growth drivers remain essential. The momentum is promising, but long-term stability will depend on converting this phase of government-led expansion into a more balanced, private-sector-driven economic cycle that strengthens India’s position globally.

(Sources: Moneycontrol, Business Standard, Indian Express)