India’s Gross Domestic Product (GDP) is expected to expand by 7.2% year-on-year in the second quarter of FY26, supported by robust private consumption and steady domestic demand, according to India Ratings & Research (Ind-Ra). This represents a significant rebound from the 5.6% growth reported during the same period last year and comes after a strong 7.8% increase in Q1 FY26 — the fastest growth recorded in over a year.
Ind-Ra highlighted that private consumption continues to be the primary driver of the economy, fuelled by rising real incomes across various income groups, moderate inflation, and a favourable base effect. On the production side, the services sector remained the key contributor to growth, while improving goods exports and steady performance in manufacturing helped sustain overall economic momentum.
The agency estimated that private consumption grew by around 8% year-on-year in Q2 FY26, an improvement from the 7% recorded in Q1. This surge was attributed to income tax reductions, stronger rural wage growth, and steady job creation in both urban and semi-urban areas. Investment activity also showed positive signs, with Ind-Ra projecting a 7.5% year-on-year rise, supported by continued government-led capital expenditure and private sector participation in infrastructure and manufacturing.
However, the report cautioned that nominal GDP growth might have slowed to below 8%, potentially affecting tax revenue collection in the upcoming quarters. This moderation, Ind-Ra noted, could present fiscal challenges for policymakers aiming to maintain a balance between growth-oriented spending and fiscal consolidation.
Overall, the agency’s outlook points to a resilient economic trajectory for India in FY26, underscoring the strength of domestic consumption, consistent investment activity, and a recovering export sector. Official GDP data for the second quarter is expected to be released by the National Statistics Office (NSO) on November 28, which will confirm whether the economy maintains its current pace of expansion.
