India's Q2 FY26 GDP growth estimated 7.2% YoY: Ind-Ra

“From the demand side, private consumption is a leading growth driver due to steady real income growth both in upper- and lower-income households. The resilient services sector along with the favourable base-led goods exports growth in the manufacturing sector propelled GDP growth from the supply side during 2QFY26”, said Paras Jasrai, Ind-Ra economist and associate director, in a release.

The economy has navigated the treacherous waters better than expected due to strong domestic demand. Retail inflation has declined faster than both the agency and the Reserve Bank of India’s expectations, boosting real wages and consumption demand, the rating agency noted.

A flat wholesale price inflation along with benign retail inflation might have further lowered the GDP deflator growth during Q2 FY26, possibly matching the level of 0.2 per cent YoY recorded during Q2 FY20.

Consequently, the nominal GDP growth is likely to have slipped below 8 per cent YoY during Q2 FY26, the spillover effect of which is getting reflected in slowing taxes of the government.

Slowing net tax collection (production tax net of subsidies) growth is likely to have caused GDP growth being lower than the gross value added (GVA) growth in Q2 after a gap of two quarters, Ind-Ra remarked.

Ind-Ra expects private consumption to have grown by 8 per cent YoY in Q2 FY26; its growth was 7 per cent YoY in Q1. A favourable base effect, record low inflation, along with steady real rural wage growth, would lift the consumption demand growth to a three-quarter high.

The agency expects exports growth (goods and services) to have jumped to a 13-quarter high of 11.4 per cent YoY in Q2 FY26. It was led by 13.5 per cent YoY growth in goods exports.

It also expects the industrial sector to have risen by 7.8 per cent YoY in Q2 FY26, owing to the strong growth in manufacturing and construction sectors. The manufacturing sector is expected to have grown at a healthy 8.5 per cent YoY during the quarter.

Ind-Ra expects the retail inflation to have declined to a record low of 0.8 per cent in October 2025 from 1.5 per cent in September due to a fall in food prices. It expects the core inflation to have remained at 4 per cent due to the goods and services tax rate rationalisation.

ALCHEMPro News Desk (DS)