India’s economy grew by a higher-than-expected 8.2% in the July-September period, its quickest pace in 18 months.

Beating forecasts, the July-September growth was led by a rise in factory production in anticipation of a festive-season consumption surge following Prime Minister Narendra Modi’s announcement in his Independence Day address that GST rates would be lowered across various sectors effective 22 September.

Taking to X, Modi said the data is “very encouraging” and reflected the impact of pro-growth policies and reforms.

“Our government will continue to advance reforms,” he added.

The government has cut goods and services tax (GST) on a wide range of items and implemented labour reforms to beat slowdown in the economy amid trade uncertainties with the US due to imposition of 50% tariffs on Indian goods.

CEA revises GDP forecast for FY26

As per data released by the National Statistics Office (NSO), the Gross Domestic Product (GDP) in the first half of 2025-26 worked out to be at 8%, up from 6.1% a year ago.

The speed at which the economy has grown in the first six months has prompted the government’s chief economic advisor Anantha V Nageswaran to project the full-fiscal outlook for GDP growth rate at 7%, or higher than that.

The Economic Survey, tabled in Parliament in January, had estimated India’s GDP growth rate at 6.3-6.8% for FY26.

Earlier in October, the Reserve Bank of India (RBI) had revised upwards its GDP forecast to 6.8% from the earlier projection of 6.5% for FY26.

Speaking to reporters, Nageswaran said the Indian economy is expected to cross $4 trillion in the current fiscal year, given the current rate of growth.

India's GDP stood at $3.9 trillion at the end of March this year, he added.

The third quarter of the current fiscal year has commenced on a sound footing, he pointed out.

He further said that the rural demand remains resilient while urban demand is gaining traction post-GST rate cut.

How 8.2% GDP growth was achieved

In the September quarter, the manufacturing sector grew at 9.1% compared to 2.2% a year ago.

The fiscal second-quarter performance was also backed by a double-digit growth in the services sector, offsetting deceleration in farm output.

The services sector, including banking and real estate, grew at 10.2% compared to 7.2% a year ago. The agriculture sector’s growth decelerated to 3.5% from 4.1% in the earlier year.

Private consumption drove the growth in the fiscal second-quarter. Data showed that private consumer spending, which accounts for around 57% of the GDP, rose 7.9% year-on-year in the three months ended September. This was higher than the 7% growth reported in the preceding June quarter and 6.4% in the year-ago period.

During this period, government spending fell 2.7% year-on-year.

How compares with previous growth data

The September quarter’s growth compared with 7.8% in the preceding three months and 5.6% in the year-ago period.

The previous high of India’s GDP was at 8.4%, reported in the January-March quarter of FY24.

India retained its position as the world's fastest-growing major economy even as China’s GDP grew at 4.8% in the July-September quarter.

IMF’s India grading

Meanwhile, the International Monetary Fund (IMF) has given India’s national accounts statistics a ‘C’ grade, its second-lowest rating. This report includes data such as the GDP and the Gross Value Added.

The IMF’s November country report noted that India’s national accounts data has “some methodological weaknesses” that “somewhat hamper surveillance”.

“Going forward, regular benchmark revisions of national accounts, prices, and other key statistics should be conducted according to international best practices,” the IMF said in its annual review of India’s economic framework.

The IMF gave an overall ‘B’ grade on India’s official statistics. This is based on other parameters such as prices, inter-sectoral consistency, monetary and financial statistics, and statistics on government finance and the external sector.

Economists divided on rate cut

The high growth rate has lowered the expectations among some economists for an interest rate cut in the RBI’s December monetary policy but others are batting for a reduction by 25 basis points.

According to Aditi Nayar, chief economist at ICRA, India’s growth “significantly surpassed expectations” in contrast to “widespread market expectation of some moderation”.

“With the Q2 FY2026 GDP growth exceeding 8%, the probability of a rate cut in the December monetary policy committee (MPC) review has certainly eased, notwithstanding the series-low CPI inflation print for October 2025,” she said.

Economists, however, are divided and expect it to be a close call. According to DBS Bank senior economist at DBS Bank, the RBI's MPC faces a challenging act amid strong growth and record low inflation. “We expect an emphasis on forward looking growth guidance and high real rate buffer due to weak inflation, to justify a move to lower rates further,” she said.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, also expects a repo rate cut. "Despite the high real GDP growth, we retain our expectations of 25 bps of rate cut in the upcoming policy as inflation trajectory remains benign," she said. ⁠

RBI Governor Sanjay Malhotra earlier said that there is room for a rate cut, but the final call will depend on the MPC.

The RBI has already cut repo rate by 100 basis points this year to bring it down to 5.5%.