Q2 GDP surprise prompts economists to raise FY26 growth to above 7%

Economists also highlighted that a US trade deal could dramatically alter the outlook.

India’s better-than-expected GDP print for the September quarter has prompted several economists to raise their FY26 growth projections. The economy expanded 8.2 percent in the fiscal second quarter, beating both the Moneycontrol poll estimate of 7.3 percent and the RBI’s 7 percent.
Revisions have come across major research houses. Barclays has raised its forecast from 6.8 percent to 7.2 percent, ICRA from 6.8 percent to 7.3 percent, IDFC First Bank from 6.8 percent to 7.6 percent, and CareEdge from 6.9 percent to 7.5 percent. Crisil also lifted its projection to 7 percent, from 6.5 percent earlier.

Strong first half prompts upgrades

Crisil said its upgrade reflects a “stronger-than-expected first half,” though it expects growth to moderate to 6.1 percent in H2, compared with 8 percent in H1. The agency noted that early export shipments to the US supported growth, but India’s outbound shipments are now facing pressure from the 50 percent US tariff rate. Exports to the US fell 10.2 percent year-on-year in September–October after reciprocal tariffs were imposed.

“The impact of GST rate rationalisation, effective September 22, should become more visible in the third quarter, while income-tax cuts under the new regime are likely to lift disposable incomes,” Crisil wrote in a note.

CareEdge chief economist Rajani Sinha said growth could moderate to around 7 percent in H2, as the front-loading of exports fades and consumption normalises after the festive season.

“By Q4, the base effect will weaken, and the deflator will rise from current low levels, tempering real GDP growth,” she noted, projecting 7.5 percent growth for FY26.

Barclays made one of the sharpest upward revisions. Chief economist Aastha Gudwani said the Q2 upside surprise, combined with strong early signs from Q3, justified raising the forecast to 7.2 percent, with GST cuts and festival demand supporting consumption.

Economists also highlighted that a US trade deal could dramatically alter the outlook. Indian authorities have pushed back against the IMF’s assumption that a deal could be delayed.

“In case India gets a trade deal with the US by December 2025, this would result in upward revision in Q4FY26 growth. Full-year GDP growth would be closer to 8 percent in such a scenario,” said Gaura Sengupta, chief economist, IDFC First Bank.

RBI policy less certain

While there is broad agreement that growth is now likely to exceed 7 percent, the stronger print has injected uncertainty into expectations for a rate cut at the RBI’s policy review this week.

With growth showing substantial resilience, ICRA’s chief economist Aditi Nayar said the likelihood of a December rate cut has “certainly eased,” even though inflation remains at a series low.

Gudwani echoed this view. “We no longer expect the RBI MPC to cut the policy rate in the upcoming December 5 meeting. After the October CPI inflation came in at a series low of 0.25 percent, we highlighted that it was too low to ignore and thus called for a December rate cut. Today’s Q2 real GDP/GVA growth surpassed our and the RBI’s expectations.”

A Moneycontrol poll conducted before the GDP release showed four in five economists predicting a 25-basis-point cut to 5.25 percent in the December policy.

The stronger growth data, however, now raises the possibility that the central bank may choose to wait.