India’s Q2 growth forecast at 7.3% on rural show, higher govt capex

New Delhi: India’s economic growth is likely to have accelerated to 7.3% in the second quarter of the fiscal year, thanks to a resilient rural economy, higher government spending and early export shipments, according to an ET survey of 12 economists. Estimates in the survey ranged from 6.9% to 7.7%, with the median being 7.3%. The Office for National Statistics will publish official figures on 28 November. The Reserve Bank of India has estimated September quarter growth at 7%.

GDP increased by 7.8% in the April-June period, the fastest increase in the last five quarters. GDP growth in the September quarter of last year was 5.6%. “As high-frequency data shows, a sustained recovery in economic momentum emerged in the second quarter, driven by agriculture, manufacturing and construction,” said Rajani Sinha, chief economist at CareEdge Ratings.

Yuvika Singhal, economist at QuantEco Research, said the growth momentum is supported by rising consumption in rural and urban areas, slowing inflation, rising rural wages, positive prospects in agriculture, income tax cut and the lagged effect of previous monetary expansion.

He added that this boom continues despite headwinds from heavy rains, high US tariffs and delayed demand ahead of expected GST rate cuts in September.

Solid Industrial Output

The simplified two-rate GST structure of 5% and 18%, effective September 22, has reduced taxes on various household goods and durable goods. Economists said that pre-festive inventory increase along with GST rationalization also supported the activity. Industrial production strengthened; The Industrial Production Index increased by an average of 4.1% in the September quarter, compared to 2.7% in the previous year. Manufacturing production increased 4.9% from 3.3% in the same period last year. Government capital expenditure rose 31% in the September quarter; This was slower than the 52% increase in the previous quarter, but stronger than the 10% growth recorded a year ago. Merchandise exports rose 8.8%, reversing a 7% decline in the same quarter last year, driven by front-loading shipments ahead of U.S. tariffs.

India’s exports face a 50% tariff in the US, including a 25% penalty on oil imports from Russia. “Signing a trade deal with the US in the near future could bring higher tariffs closer to those in the rest of Asia and provide some relief to the export sector,” said Aurodeep Nandi, Nomura’s India economist.

growth view

Economists estimate GDP growth for FY26 to average 6.9%, with estimates ranging from 6.3% to 7.4%. The RBI expects 6.8%. While higher US tariffs remain a significant risk, analysts see domestic demand supported by consumption and government investment as a strong offset.

“Underlying economic activity is likely to remain strong until the third quarter due to pent-up demand led by GST,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Still, he cautioned that the persistence of consumption beyond the fourth quarter and the trade outlook remain uncertain.

The World Bank and the International Monetary Fund expect the Indian economy to remain among the fastest growing major economies globally, growing at 6.5% and 6.6% respectively in FY26.