India’s economy is poised to deliver another quarter of robust growth, with the majority of economists projecting that the Gross Domestic Product (GDP) expanded by 7% to 7.5% in the July to September 2025 quarter (Q2 FY26). This strong performance, though slightly moderated from the 7.8% expansion in Q1, confirms that resilient domestic demand is successfully insulating the economy from volatile external conditions.

Official Q2 figures will be released by the government on November 28, but current analyst forecasts paint a picture of sustained momentum.

Key Drivers Fueling the Growth

The projected growth is not reliant on a single factor but is driven by a healthy interplay between consumption, investment, and government policy:

• Consumption Boost: Private consumption has emerged as a leading growth driver. This is attributed to steady real income growth across various household income segments and the impact of the GST rationalization in September 2025, which reduced taxes on numerous consumer goods, spurring early festive spending.
• Industrial Rebound: The industrial sector, particularly manufacturing and construction, is expected to outperform the services sector for the first time in several quarters. This is fueled by high government capital expenditure and pre-festive inventory stocking, which provided a significant lift to factory output.
• Infrastructure Investment: The government continues to accelerate capital expenditure. Major projects, such as the National Highways Authority of India (NHAI) inviting bids for 52 highway projects and the announcement of a ₹1 lakh crore infrastructure overhaul for Bengaluru (including twin tunnels and a double-decker metro), are creating massive demand and employment.

RBI Policy Dilemma

The strong growth forecasts create a policy challenge for the Reserve Bank of India (RBI), which is due to meet in early December. With growth momentum remaining robust and inflation staying relatively benign, the RBI’s Monetary Policy Committee (MPC) faces a difficult decision regarding the timing of any potential interest rate cuts. Some analysts argue that the optimal window for pre-emptive rate easing may have already passed.

The current outlook suggests India is on track to achieve an annual GDP growth rate in the range of 6.8% to 7.3% for the full fiscal year 2025-26, cementing its position as the fastest-growing major economy globally.

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