India’s September quarter GDP knowledge for this fiscal 12 months exceeded all expectations and got here in at 8.2%, greater than 7.8% in Q1 FY26 and considerably greater than the identical interval final 12 months. This supplied policymakers with a short sense of aid, days after October commerce knowledge revealed a historic deficit of $41.68 billion. That is partly because of a threefold enhance in bullion imports, an indication of financial uncertainty. Development was pushed by manufacturing (9.1%) and companies (9.2%), supported by a restoration in client spending. Non-public ultimate consumption expenditure elevated by 7.9% in 2QFY26 in comparison with 6.4% in 2QFY25. Authorities spending additionally rose barely. Taken collectively, these counsel a broad uptick in home exercise regardless of world headwinds. Nonetheless, the total impression of the exterior shock is more likely to floor within the coming quarters. The “two-tier” tariffs imposed by the US on India in August went into impact mid-quarter. The front-loading of export orders forward of those tariffs may have boosted output within the second quarter. A second statistical impact comes into play. Retail inflation in October reportedly fell to 0.25%, the bottom within the present CPI sequence, contributing lower than 1% to the GDP deflator. A deflator this low mechanically inflates actual GDP relative to nominal. The slim hole between nominal GDP (8.7%) and actual GDP (8.2%) highlights this. Headline GDP progress may gradual if inflation rises, enter prices rise, or if oil costs rise as India diversifies away from Russian crude. RBI’s upcoming Financial Coverage Committee assembly will increase uncertainty as any coverage charge creates demand-side stress.
A breakdown of gross worth added exhibits that capital-intensive infrastructure-related sectors are on the heart of this momentum, with building rising by 7.2% and the companies subsegment of finance, actual property {and professional} companies rising by 10.2%. Month-to-month industrial indicators verify this sample, with IIP rising 4% in September, with greater progress in capital-intensive core classes corresponding to metal (14.1%) and cement (5.3%). That is according to the impression of the three repo charge cuts through which the RBI minimize the coverage charge to five.5% in June this 12 months, which can have supported funding exercise. What’s necessary is that the composition of progress stays uneven. This quarter’s growth has been pushed by capital-intensive and high-skill sectors (banking and know-how), whereas high-employment, labor-absorbing sectors proceed to lag. IIP knowledge for the previous six months additionally exhibits sluggish rural consumption. There’s subsequently motive for cautious optimism. Nonetheless, the expansion spurt within the September quarter seems to have been concentrated within the higher-paying formal sector, at the same time as low-income, export-related and labor-intensive sectors wrestle. Commerce knowledge for September and October are already exhibiting warning indicators, and it might be untimely to conclude that this tempo of progress will be sustained.
