Q2 GDP growth zooms to 8.2% on GST rate cuts

New Delhi: India's economy grew at a higher-than-expected 8.2 per cent - the fastest pace in six quarters - in July-September, as front-loading of production ahead of GST rates cut boosted consumption that helped offset the impact of steep US tariffs. The 8.2 per cent gross domestic product (GDP) growth, which follows a 7.8 per cent expansion in the preceding April-June quarter, helped India retain the title of the world's fastest growing major economy, according to official data released on Friday.

The GDP growth came ahead of the festive season consumption boost on the back of the implementation of a significant reduction in the goods and services tax (GST). It, however, does not factor in the full quarter impact of an additional 25 per cent punitive tariff on Indian exports that took the total levy to 50 per cent in August. The expansion, which was more than China's 4.8 per cent, was driven by higher public investments, services demand, industrial output and firm consumption, besides statistical effects of a low base (the economy grew at a below-average 5.6 per cent in the same quarter last fiscal).

A low GDP deflator also lent some buoyancy. Inflation based on both the Consumer Price Index and the Wholesale Price Index was lower in the second quarter compared to the first. Lower food inflation stoked discretionary spending. Prime Minister Narendra Modi termed the GDP growth as "very encouraging." "It reflects the impact of our pro-growth policies and reforms. It also reflects the hard work and enterprise of our people.

Our government will continue to advance reforms and strengthen Ease of Living for every citizen," he said in a post on X. Following the GST rate cut announcement by Prime Minister Narendra Modi in his Independence Day address, factories stepped up their output to meet the festival season demand.

The GST rate cut came into effect on September 22. Private consumer spending, which accounts for around 57 per cent of GDP, rose 7.9 per cent in July-September - the second quarter of the current 2025-26 fiscal - compared to a 7 per cent rise a quarter ago, according to data released by the National Statistics Office (NSO). Manufacturing output rose 9.1 per cent against a growth of 7.7 per cent in the preceding quarter and 7.6 per cent in the year-ago period, while construction expanded 7.2 per cent from 7.6 per cent in the previous quarter.

Government spending decelerated, declining 2.7 per cent in Q2, compared to a growth of 7.4 per cent in the previous quarter. Finance Minister Nirmala Sitharaman said the GDP print shows that reforms and fiscal consolidation drove the Indian economy's robust growth and momentum. "Various high-frequency indicators also point to continued economic momentum and broad-based consumption growth," she said in a social media post.

"The GDP estimates released today show the robust economic growth and momentum of the Indian economy. With a Real GDP growth rate of 8.2 per cent for Q2 - FY 2025-26 (July-September), India is the world's fastest-growing major economy." The growth, she said, has been driven by sustained fiscal consolidation, targeted public investment, and various reforms that have strengthened productivity and improved ease of doing business. The government is committed to sustaining this growth momentum and advancing reforms that support long-term economic growth, she added.

Commenting on the GDP numbers, India's Chief Economic Adviser V Anantha Nageswaran said the Indian economy is expected to cross USD 4 trillion in the current fiscal year, given the current rate of growth. India's GDP was USD 3.9 trillion in FY25, which ended March 31. As India's economy recorded an 8 per cent growth rate in the first half of the current financial year, he said, the full-year outlook for GDP growth rate is now 7 per cent, or north of 7 per cent. The third quarter (October-December) of the current fiscal year has commenced on a sound footing, he pointed out. Further, the rural demand remains resilient while urban demand is gaining traction post-GST rate cut.

While the real GDP growth at 8.2 per cent in the second quarter exceeded expectations, the nominal print was modest at 8.7 per cent. The difference between real and nominal is the smallest since the third quarter of fiscal 2020.