Ind-Ra Forecasts 7.2% GDP Growth for India in Q2 FY26

Description :

India Ratings & Research projects India’s GDP to grow by 7.2% in July-September quarter (Q2 FY26), driven by private consumption and resilient services.

Published on:

12 November 2025 | 11:15 AM (GMT+05:30, IST, India) Published by: Mr. Dibakar Mandal

Introduction

India’s economy appears to be accelerating ahead of expectations, with leading credit-rating and research firm India Ratings & Research forecasting a robust 7.2% growth in the gross domestic product (GDP) for the July-September quarter of the financial year 2026 (Q2 FY26). This forecast reflects renewed strength in domestic demand, particularly private consumption, along with resilience in the services sector and a gradual recovery in manufacturing. According to the research brief, the growth leap comes despite global headwinds such as supply-chain disruptions and inflationary pressures. If realised, the 7.2% growth rate would mark one of the strongest quarterly expansions for India in recent years, reinforcing its position as one of the fastest-growing large economies. The projection also raises hopes that India’s growth trajectory may remain elevated through the fiscal year, supporting investment sentiment and policy confidence.

Background Section

India’s macro-economic journey over the past few years has been marked by alternating phases of strong growth and headwinds. In the previous fiscal year, while India managed growth in the range of 6–6.5%, challenges such as global commodity price shocks, weak private investment and the aftermath of the pandemic dampened momentum. In Q1 FY26 (April-June), India had already registered a growth rate of 7.8% year-on-year, according to data referenced by analysts — the fastest pace in several quarters. The banking, information technology, and consumer-services sectors showed particular strength in that period. Meanwhile, the government’s push for capital expenditure and infrastructure spending has helped shore up demand, especially in regional and rural markets. The policy environment has also been supportive: tax cuts, a stable inflation profile, and continued reforms in manufacturing and digitalisation. In this context, the Ind-Ra forecast of 7.2% for Q2 FY26 suggests that the domestic demand engine remains intact even as global uncertainties persist. Private consumption is estimated to have expanded sharply, supported by real-income gains and higher rural wages. Investment demand, aided by steady government capex, also appears to have contributed. Analysts caution, however, that while the headline number may look strong, underlying risks — such as slowing global growth, export volatility and weak nominal GDP growth — remain relevant for the medium-term outlook.

Drivers of Growth: Consumption, Services and Investment

According to India Ratings & Research, private consumption is the leading engine of growth for Q2 FY26, estimated at a year-on-year growth rate of around 8% — up from 6.4% in the same quarter last year. Real income growth, low inflation, and steady rural wages have buoyed household spending. The services sector — especially financial, professional, and consumer services — continues to deliver strong expansion. On the manufacturing side, goods-exports have shown signs of recovery, helped by a favourable base and increased global demand for India-made products. Investment demand, although still moderate, is supported by sustained government capital expenditure and infrastructure projects — which in turn stimulate private investment via crowd-in effect.

Risks and Caveats: Nominal Growth & Fiscal Implications

While the real GDP growth trajectory is optimistic, Ind-Ra flags a notable risk: nominal GDP growth may slip below 8% in Q2 FY26. Since tax revenues and budgetary calculations are based on nominal GDP, a weak nominal print could challenge fiscal space and government revenue targets. Moreover, global headwinds such as trade tensions, technology disruption and commodity price volatility remain possible drags. Additionally, while consumption is picking up, capacity constraints and slower credit growth could limit investment-led expansion. The firm also emphasises that sustaining growth beyond this quarter will depend on continued reform momentum and global demand revival.

Comparative Outlook: Global and Domestic Benchmarks

India’s projected 7.2% growth stands out among major economies. For example, many advanced economies are grappling with growth rates in the 2–3% range. In emerging markets, growth is often constrained by weaker domestic demand or export dependency. The strong forecast for India underscores its relatively high domestic-demand orientation and policy framework. At the same time, demographically favourable factors — a large young population, high savings rate, and rising household incomes — continue to provide structural support. According to international institutions such as the World Bank and International Monetary Fund (IMF), India remains among a small group of large economies expected to cross the 6% growth threshold in 2025-26.

“India’s growth engine remains resilient even amidst global headwinds, driven by private consumption and structural policy shifts,” noted economists at Ind-Ra.

Policy Implications and Market Reactions

The forecast has multiple implications: for monetary policy, the strong growth environment — combined with contained inflation — may give the central bank some flexibility. For fiscal management, sustaining growth will help absorb inflationary pressures and allow space for continued capital expenditure. Financial markets reacted positively: equity indices rose, and bond yields moved modestly lower, reflecting the improved growth sentiment. However, analysts warn that markets may become cautious if nominal GDP remains weak or external risks materialise.

Medium-Term Outlook: Maintaining Momentum

To maintain this high growth pace, India needs to focus on investment, export diversification, and productivity improvement. Structural reforms in land, labour and logistics — alongside ramped-up digital infrastructure — will be key. On the export front, shifting global supply chains towards India provide an opportunity, but competitive pressures and currency risks will need active management. Realising the demographic dividend by improving education and skills is another essential element. If growth can be sustained above 6.5% annually over the medium term, India’s economy could accelerate into the 7-8% range — a positive sign for employment, incomes and global competitiveness.

Conclusion

India Ratings & Research’s forecast of 7.2% GDP growth for Q2 FY26 offers a strong signal that India’s economy is navigating global uncertainties better than many peers. The broad-based nature of growth — driven by consumption, services and investment — underlines the resilience of the domestic economy. That said, realising this forecast and building on it will require vigilant policy management, export momentum, and improvement in nominal GDP figures to support government revenue. For investors, policymakers and citizens alike, the message is clear: India is in a favourable growth phase — but converting it into sustainable long-term expansion is the next crucial step.

FAQs

1. What does a 7.2% GDP growth projection mean for India?
It means that in Q2 FY26, India’s economy is expected to grow by 7.2% compared to the same quarter last year — signifying a very strong expansion relative to recent years.

2. Why is private consumption considered the main growth driver?
Because with rising household incomes, lower inflation and strong rural wages, consumer spending is increasing — which supports sectors such as services, retail, and manufacturing.

3. What is the difference between real GDP growth and nominal GDP growth?
Real GDP growth adjusts for inflation and reflects the volume of production, while nominal GDP growth is in current prices and includes inflation; a strong nominal growth is important for tax revenues.

4. What risks could derail this growth projection?
Key risks include weak global demand, trade disruptions (especially in exports), a fall in domestic investment, and a weak nominal GDP print that constrains fiscal space.

5. How might this forecast affect government policy?
If growth remains strong, policymakers may retain or increase capital expenditure, support consumption-stimulus measures, and give central bank flexibility — but they must guard against overheating or external shocks.

External Resources and References

• Economic Times – India’s GDP likely grew 7.2% in Q2; private consumption key driver: Ind-Ra report
• Business Standard – GDP likely to grow 7.2% in Q2 FY26, driven by private consumption: Ind-Ra
• India Ratings & Research – Press Release / Presentation (July 2025)
• Reuters – India economy news and global comparatives
• World Bank – India Country Outlook
• International Monetary Fund (IMF) – India economic data

Focus Keyword: India GDP growth
Related Keywords: Q2 FY26 GDP India, Ind-Ra forecast, private consumption India, India economic growth 2025-26, nominal GDP India