India’s economy is showing renewed strength, with real GDP expected to grow by 7.2% in the second quarter of FY26 (July–September 2025). This marks a notable improvement over the same quarter last year and highlights the critical role of private consumption and government capital expenditure in maintaining growth momentum amid global economic uncertainties.
According to the latest economic analysis, private consumption is the leading contributor to GDP growth in Q2 FY26. It is estimated to have expanded by 8% year-on-year, compared to 7% in Q1 and 6.4% in Q2 FY25.
Several factors contributed to this robust consumption trend,
These dynamics increased household spending, especially in the rural and middle-income segments. Income tax cuts and stable commodity prices further helped fuel consumption demand.
On the supply side, India’s services sector remained resilient and continued to grow. Combined with a base-led pickup in manufacturing output, especially in goods exports, these sectors added strong momentum to the overall GDP figures.
Lower input costs across sectors also played a role in preserving business margins and stimulating output, even as global demand remained moderate.
Investment demand also performed well during the quarter. It is estimated to have grown by 7.5% year-on-year, sustained primarily by,
The investment climate remained stable despite external uncertainties, and capital outlays helped compensate for any dip in external demand.
While real GDP growth has remained strong, nominal GDP growth is expected to have fallen below 8% year-on-year, a signal that could create challenges for government revenue collection.
This trend suggests,
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