India’s economic growth is expected to remain strong in the second quarter of the current financial year, with GDP likely to rise 7.5 per cent, according to a report by Union Bank of India. This would be significantly higher than the 5.6 per cent growth recorded in the same quarter of the previous financial year. The official GDP data for Q2 FY26 will be released on November 28.
According to the report, “GDP data for Q2 FY26 likely clocked 7.5 per cent, sharply higher than the same period last year (Q2 FY25: 5.6 per cent), but lower than the 7.8 per cent recorded in the previous quarter.”
Gross Value Added (GVA) growth for Q2 FY26 is also projected to rise to 7.3 per cent, compared to 5.8 per cent in Q2 FY25, though it remains below the 7.6 per cent expansion seen in Q1.
The report noted that nominal GDP growth is expected to slow further to 8.0 per cent in Q2, down from 8.8 per cent in Q1 and slightly lower than 8.3 per cent during the same period last year. A favourable base effect and subdued deflator growth – which had pushed Q1 numbers higher – continued to act as statistical drivers in the second quarter as well.
The report also said that the steep 50 per cent US tariffs had not fully impacted the quarter due to front-loading of exports by Indian companies. Strong government spending provided an additional boost to GDP during the period.
Private sector activity, measured through GVA excluding agriculture and public administration, is expected to remain robust at 8 per cent in Q2, broadly in line with the momentum seen in Q1 FY26. This, the report emphasised, better reflects underlying economic activity.
However, the bank cautioned that the second half of FY26 may see some moderation. It said that statistical drivers such as base effects may begin to fade, while inflation measured by both WPI and CPI could rise in the fourth quarter. Delays in finalising the US-India trade deal and the lagged impact of earlier front-loaded exports may also temper growth.
Looking ahead, Union Bank said that the recent GST rate cuts are expected to support demand and positively influence GDP in Q3 FY26. However, delays in the US-India trade agreement could still weigh on growth, although India’s direct export exposure to the US remains limited at around 2 per cent of GDP- and closer to 1 per cent when exempted items are excluded.
The bank has revised its FY26 GDP growth estimate upward to 7.1 per cent. While real GDP growth is expected to rise in FY26, nominal GDP growth may decline due to lower inflation.
(ANI)