India’s economy seems poised for another robust quarter, with GDP projected to grow about 7.5% in Q2 FY26, according to the latest State Bank of India report. SBI Research noted that this strength is being driven by a rebound in investment, improving rural consumption, and a demand surge following GST rationalization, which boosted festive spending across various sectors. The firm kept its full-year GDP forecast at 7.2–7.3%, indicating that India continues to outperform most major global economies.
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On the other hand research firm ICRA highlighted a notable shift in India’s growth drivers in Q2 FY2026, projecting industry to outpace services for the first time in four quarters even as overall GDP expansion moderates. The rating agency expects GDP growth to ease to 7.0% year-on-year from 7.8% in Q1 FY2026, with GVA growth likely to dip slightly to 7.1% from 7.6%. While the services and agriculture sectors are set to lose some momentum, a strengthening industrial performance, propelled by manufacturing, construction and favorable base effects, is expected to underpin the quarter’s economic activity.
Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA said, “A lower YoY rise in Government spending is likely to weigh on the pace of the GDP and GVA growth in Q2 FY2026 compared to Q1 FY2026. However, inventory stocking related to the early onset of the festive season, enhanced by the GST-rationalisation induced volume pick-up, and upfronting of exports to the US ahead of the tariffs, are expected to boost the performance of the manufacturing sector, and help industry GVA growth outpace that of the services after a gap of four quarters.”
“Unless the GoI’s capex allocation is enhanced and the tariff-related uncertainties ebb, the GDP growth appears set to ease below 7.0% in H2 FY2026. While the well-timed GST rationalization may result in a steady boost in volumes of consumer non-durables going ahead, consumer durables may see a trend of premiumization instead of a sustenance of the spike in volumes that was seen during the festive season,” she noted.
