Indian Economy likely to have grown between 7-7.5% during Q2 of FY26, suggest reports

NEW DELHI : A Finance Ministry report on Thursday indicated that the economic growth rate during the July-September quarter (Q2 of Fiscal Year 2025-26) could be in the range of 7-7.5 per cent. Statistics Ministry will release the official data for growth on Friday.

“Various independent economic assessments place real GDP growth for Q2 FY26 in the range of 7.0–7.5 per cent, indicating continued strength in underlying economic activity. Overall, the economy enters the second half of FY26 on a stable footing, anchored by well-contained inflation, resilient domestic demand and supportive policy dynamics, even as global uncertainties warrant continued vigilance,” the Monthly Economic Review (MER) prepared by the Economic Affairs Department of the Finance Ministry said.

Growth during the April-June quarter (Q1 of Fiscal Year 2024-25) was 7.8 per cent. RBI has projected growth rate of 7 per cent for Q2. In a research report SBI said that growth could be 7.5 per cent with possibility of upside surprise. A report by CareEdge expects real GDP growth for Q2 FY26 to be 7.2 per cent, while the GVA growth is projected at 7.3 per cent. Further, it said: “We expect GDP growth to moderate in H2 FY26, averaging 6.3 per cent while real GDP and GVA growth for FY26 expected at 6.9 per cent y-o-y,” it said.

Meanwhile, ICRA has projected the year-on-year (y-o-y) GDP expansion to ease to 7.0 per cent in Q2 from 7.8 per cent in Q1. Further, it projects the growth in the gross value added (GVA) to record a narrower dip to 7.1 per cent from 7.6 per cent, respectively.

Though the said quarter had just a week of GST rate cut, most of the agencies listed this as one of the reasons for higher growth. The MER said that the overall macroeconomic environment remains stable, supported by easing inflation, resilient domestic demand, and continued policy momentum. “The favourable impact of GST rationalisation is increasingly visible in consumption indicators, while robust agricultural activity—reflected in the strong onset of Rabi sowing and adequate reservoir levels—has reinforced the outlook for food supply and rural incomes,” the MER said.

Further, it said that corporate performance remains healthy, with sustained profitability and stable balance sheets. Domestic financial markets continue to draw strength from firm institutional participation. Meanwhile, “the external sector remains shaped by a complex global environment, although the persistent strength in services exports provides an important counterbalance to the volatility in merchandise trade,” the MER said.

Inflation based on Consumer Price Index (CPI) eased to an all-time low of 0.25 per cent in October, driven by the transmission of GST cuts, a favourable base effect and pronounced declines in food prices. Now, MER said that the inflation outlook remains encouraging, supported by softening global commodity prices, benign energy markets, and targeted domestic supply interventions. However, the balance of risks warrants continued vigilance. Global uncertainties—including shifting trade policies, geopolitical frictions, and financial market volatility—pose potential headwinds to exports, capital flows, and investor sentiment.

Notwithstanding these challenges, “the confluence of well-anchored inflation expectations, sustained public capital expenditure, and firming rural and urban demand places the economy on a stable footing, positioning it to navigate emerging risks and preserve its growth momentum through the remainder of FY26,” the MER concluded.

Source : BL