India's economic growth is projected to remain strong in the second quarter of fiscal year 2026, with forecasts suggesting a GDP expansion of around 7.2%. This growth is primarily fueled by private consumption, a resilient service sector, and steady government capital expenditure.

India Ratings & Research (Ind-Ra) projects a GDP growth of 7.2% for Q2 FY26, citing private consumption as the leading growth driver. This projection is based on steady real income growth across both upper- and lower-income households. The agency also notes that the resilient services sector and favorable base-led goods exports in manufacturing have propelled GDP growth. The National Statistics Office (NSO) is scheduled to release the official GDP data for Q2 FY26 on November 28.

The Indian economy demonstrated strong performance in the first quarter of FY26, with a growth of 7.8%, the fastest in the last five quarters. In comparison, the economy expanded by 5.6% in Q2 of FY25.

Several factors contribute to this positive outlook. Retail inflation has declined faster than anticipated, boosting real wages and consumption demand. Furthermore, a favorable base effect, record low inflation, and steady rural wage growth are expected to lift consumption demand. Income tax cuts announced in the FY26 budget have also supported consumption. Ind-Ra estimates that private consumption grew by 8% year-on-year in Q2 FY26, compared to 7% in Q1 and 6.4% in Q2 FY25.

Government capital expenditure has played a crucial role in sustaining economic momentum amid global uncertainty. Investment demand is estimated to have grown by 7.5% year-on-year during Q2 FY26, supported by consistent government spending.

However, there are some concerns regarding nominal GDP growth, which is likely to have slipped below 8% year-on-year during Q2 FY26. This slowdown could complicate fiscal arithmetic. The government has assumed a nominal GDP growth of 10.1% for 2025-26. The spillover effect of lower nominal GDP growth is also reflected in slowing tax collections.

Despite global economic uncertainty and volatility, lower input costs have provided some support to the growth momentum. The GDP deflator was 0.2% in Q2 FY26, reflecting flat WPI and low CPI.

Other organizations have also provided their GDP growth forecasts for India. The Reserve Bank of India (RBI) has projected a GDP growth of 7.2% for 2024-25. The International Monetary Fund (IMF) and the World Bank have estimated it at 7.0%. S&P Global Ratings has retained India's GDP forecast for FY25 at 6.8%.