Can India hit 7 percent again in the September quarter?

India's economy is set for another 7%

India’s economy could sustain 7 percent growth in the September quarter, economists told Moneycontrol, with front-loaded exports to beat the US tariff increase, higher government capital spending, and a low GDP deflator offsetting the drag from slowing industrial momentum.

A low GDP deflator indicates that inflation is subdued and boosts the calculation of real GDP growth.

“Q2FY26 (September quarter) GDP growth is expected to be on the higher side between 7 percent and 7.5 percent, with GDP deflator growth likely to remain low. The latter will boost real GDP growth. Government capex will also be another support to growth. Front loading of exports to the US has continued for majority of Q2,” said Gaura Sengupta, chief economist, IDFC First Bank.

India surprised with 7.8 percent GDP growth in the March quarter, powered by services and consumption. The second quarter began strongly too, with industrial production rising to a four-month high of 3.5 percent in July.

“2QFY26 GDP is likely to clock around 7 percent plus growth again, aided by a low deflator and reasonably firm activity for the first half of the quarter,” said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank.

Sentiment indicators also remain encouraging. Business activity indices show services and manufacturing climbing to multi-decade highs, with HSBC’s composite index in August touching a 17-year peak. “High PMI numbers indicate strong domestic demand expectations by private firms. High sentiments amidst external volatility suggest healthy confidence for demand conditions,” said Paras Jasrai, associate director, India Ratings and Research.

Still, not all analysts are convinced. “PMI is a sentiment indicator with a small sample size. Export orders have slipped to a five-month low, and the full effect of 50 percent tariffs will show up September onwards. GDP growth is likely to decelerate Q2 onwards, though festive season demand and low deflator could support momentum into Q3,” warned Yuvika Oberoi, economist, QuantEco Research.

The RBI has pegged Q2 growth at 6.7 percent. Experts highlight that the GST rate cuts, approved on September 4 and effective from September 22, could provide additional support to demand, though the impact will be partial in this quarter. “On the whole, our assessment is that in Q2, growth would also be buoyant and can be close to 7%. A positive base effect would also facilitate reaching this level,” said DK Srivastava, chief policy advisor, EY India.

Some economists remain cautious about nominal growth, which was just a percentage point higher than real GDP in Q1—well below the government’s 10.1 percent target for FY26. “The momentum may not sustain in 2H FY26. We need to monitor nominal GDP growth closely given disruptions from tariffs and GST-led demand postponement,” Bhardwaj noted.

ICRA chief economist Aditi Nayar was more cautious: “Notwithstanding the PMI numbers, we anticipate the headline GDP growth to fall well below 7 percent in Q2 FY26, based on signals from government capex, coal and electricity as well as other high-frequency indicators. GST and tariffs will weigh in the second half, even if GST later becomes a tailwind.”

With Q1 surprising on the upside and GST cuts cushioning household budgets, most economists now believe FY26 growth will meet or exceed 6.5 percent, roughly in line with last year’s performance. “Given the earlier-than-expected GST rationalisation and sharper-than-expected Q1 GDP, we now assess FY26 GDP growth at 6.5 percent. But the outlook remains clouded by tariff uncertainty,” Nayar said.