Although it likely slowed down from the previous quarter, India's GDP growth in Q2 remained robust and above the RBI's forecast. The growth of more than 7% was caused by a number of reasons, including statistical influences.
According to a Mint survey of 15 analysts, rural demand and the statistical impact of a low base and low inflation will likely keep India's economic growth strong at 7.2% in the July-September quarter, even if it is marginally slower than 7.8% in the previous one. Later on Friday, the official GDP numbers will be released.
For the September quarter, experts predicted that India's GDP will expand by 7% to 7.7%.
A low base is perhaps one of the reasons for the high anticipated growth number. GDP growth has decreased from 6.5% in the previous quarter to 5.6% in the same quarter last year. The fact that wholesale inflation decreased to 0.02% from 0.26% in Q2FY2026 and retail inflation decreased to 1.7% from 2.7% in Q1 would help increase the real GDP growth number, which accounts for inflation in current prices.
Growth outside of statistics
Even before the current GST rate cuts took effect, high-frequency indicators did demonstrate better growth momentum beyond statistical impacts. According to Gaura Sen Gupta, an economist with IDFC First Bank, "pick-up in rural demand indicators has become broad-based, supported by rise in rural wages and second consecutive year of good monsoons."
Yuvika Singhal, an economist at QuantEco Research, noted that the quarter's economic activity was also boosted by softer inflation conditions, the transmission of earlier monetary policy easing, and inventory build-up in some sectors in anticipation of festive season demand—amplified by GST cuts at the end of September.
According to a report by Aditi Nayar, chief economist at Icra, slow increase in government capital expenditure (capex) compared to the prior quarter (31% vs. 52%) is anticipated to hinder growth. Furthermore, as evidenced by passenger car sales and air travel, urban indicators were generally sluggish throughout the quarter.
The impact of US tariffs on exports was not felt during the quarter, with exports rising 8.7% (compared to a 2.2% decrease in the prior quarter) as a result of front-loading shipments and efforts to diversify trade, thus growth is still likely to exceed projections.
Rate-cut dilemma
GDP will be somewhat higher than the Reserve Bank of India's (RBI) forecast of 7% GDP growth for the quarter if the poll estimate turns out to be correct. Despite low inflation, experts think the anticipated slowdown in growth in the second half of the year and the weak impulse in nominal GDP growth keep the door open for a rate drop, even though another good growth print may make the RBI's decision to cut rates more difficult at the December meeting.
The top economist for India at Deutsche Bank, Kaushik Das, predicts nominal GDP growth of less than 9%. Due to low inflation, nominal GDP growth in Q1 was 8.8%, compared to 10.8% in the previous quarter.
Earlier this month, Paras Jasrai, associate director at India Ratings and Research, stated that "the rationale for monetary easing is not very strong based on the trend of economic growth." "However, in its December 2025 monetary policy, the RBI may go for a 25-50 basis point cut in the repo rate to prevent the economy from going deep in sluggish and weak growth," he continued.
0 Comments