India Q2FY26 Gross Domestic Product (GDP) growth accelerated to 8.2% YoY from 7.8% YoY in the previous quarter, significantly exceeding the RBI’s projection of 7.0% YoY. Gross Value Added (GVA) picked up to 8.1% YoY in Q2 from 7.6% in Q1FY26, driven by strong manufacturing and financial services+.

Manufacturing sector growth picked up to 9.1% YoY from 7.7% in the previous quarter, supported by higher operating profit growth of listed manufacturers and an uptick in IIP manufacturing. Construction sector growth eased to 7.2% from 7.6%, in line with the slowdown in cement production. Financial Services+ reported a robust 10.2% YoY growth, despite mixed leading indicators, while Trade+ saw a moderation in growth to 7.4% YoY in Q2 from 8.6% in the previous quarter.

On the expenditure side, private consumption improved to 7.9% YoY in Q2 from 7.0% in the previous quarter, suggesting limited disruption from GST-related consumption postponement. Fixed investment growth remained healthy at 7.3% YoY, supported by robust central government capital expenditure. Net exports and government consumption weighed on Q2 GDP growth.

We expect FY26 GDP growth to be around 7-7.3% YoY. The rollout of GST 2.0 could boost consumption, but growth faces downside risks from higher US tariffs. The reduction in GST rates should deliver a significant boost to consumption, but growth faces downside risks from high US import tariffs and elevated global economic uncertainty.

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