By Harshit
NEW YORK, Nov. 28, 2025
India’s economy grew faster than expected in the July–September quarter, expanding at an annual rate of 8.2%, according to government data released Thursday. The strong showing came despite the implementation of steep U.S. tariffs and ongoing delays in a long-negotiated U.S.–India trade agreement.
The latest figure marks an acceleration from 7.8% growth in the previous quarter, when a lower GDP deflator distorted real growth readings. A Reuters poll of economists had forecast India’s second-quarter GDP growth at 7.3%, undershooting the roughly half-percentage point gap between consensus estimates and actual performance.
The deflator—which adjusts nominal GDP for inflation—was less favorable this quarter but did not weaken momentum in the headline real growth rate. Nominal GDP growth stood at 8.7%, barely changed from 8.8% in the previous quarter. The government attributed the improvement primarily to stronger manufacturing, construction and resilient service-sector activity.
Manufacturing, Construction, and Services Lead the Upswing
The Ministry of Statistics said India’s growth was anchored by a revival in industrial activity. Manufacturing expanded robustly as businesses replenished inventories following months of cautious production. Construction also performed strongly, supported by public-sector infrastructure spending and urban housing demand.
Financial services, real estate, and professional services recorded especially strong momentum, posting a 10.2% growth rate for the July–September period. The government noted that these industries have “sustained a substantial growth rate,” highlighting the continuing strength of India’s domestic-facing sectors even as external conditions grew more challenging.
Domestic Consumption Held Back, Set to Accelerate Further
Economists cautioned that domestic consumption during the quarter did not fully reflect underlying demand trends. Neelkanth Mishra, chief economist at Axis Bank, said in an interview with CNBC’s Inside India that consumer spending was “held back” ahead of GST rate cuts scheduled for late September.
Those large-scale GST reductions took effect on Sept. 22, aimed at cushioning the blow of the 50% tariffs imposed by the U.S. in August on a range of Indian exports including textiles, machinery, and select metals. Consumption subsequently picked up sharply in October, with India reporting record auto and gold sales during the festival season.
Household disposable income received an additional boost from earlier reductions in personal income tax rates. Still, this surge in consumer purchases partly contributed to India’s goods trade deficit widening to a record level in October. Weak exports combined with elevated gold imports intensified pressure on the trade balance.
Tariffs and Trade Deal Delays Cloud External Outlook
The U.S. tariff hikes have added uncertainty to India’s export performance. With negotiations stalled, economists expect continued volatility in India’s trade data. The International Monetary Fund’s newly released regional outlook suggests India’s merchandise exports will fall 5.8% in fiscal year 2026 to $416 billion, while goods imports will rise 2.4% to $746 billion, widening the trade deficit.
The IMF noted that despite the headwinds, India’s domestic economy is well positioned for medium-term stability. Its latest forecast projects India’s real GDP growth at 6.6% in fiscal 2026, moderating to 6.2% in fiscal 2027. Assuming current trends and structural reforms persist, the IMF estimates that India will surpass the $5 trillion economic milestone by fiscal 2029.
India’s Growth Outlook Remains Strong
Despite the tariff shock and external weakness, India continues to outperform other major global economies. Axis Bank’s internal models place India’s fiscal year 2026 growth rate at 7.2%, above consensus estimates.
Economists note that India’s resilience reflects three key factors:
- Strong domestic demand base, driven by a young population and rising urban incomes
- Large public infrastructure pipeline, supporting construction and heavy industry
- Service-sector momentum, particularly in financial services and technology
As global conditions remain uncertain and U.S.–India trade negotiations continue without resolution, policymakers in New Delhi are expected to push ahead with targeted stimulus, regulatory reform, and export diversification measures.
India’s latest quarterly performance underscores how the country remains one of the world’s fastest-growing major economies, even as it navigates rising geopolitical tensions and fluctuating global demand.