India’s economy recorded a faster pace of expansion in the July–September quarter, with official data showing that gross domestic product rose 8.2% year-on-year. The acceleration reflects a combination of stronger consumer demand, a revival in manufacturing activity, and accelerated production schedules ahead of India’s major festive season. Economists had widely expected the quarter to deliver robust growth, but the latest figure surpassed the projected 7.3% expansion for the period, even as Indian exporters faced higher U.S. tariffs during the same window.
Consumer spending remained one of the most influential contributors to national output. Private consumption, which forms more than half of India’s economic activity, increased 7.9% compared with a 7% rise in the previous quarter. The improvement in spending was supported in part by tax reductions introduced on several mass consumption items toward the end of September. Those measures were designed to cushion households from the impact of weaker global demand and the heightened tariff pressure on some Indian goods, which saw an additional 25% levy imposed by the United States in August.
Economists noted that pre-festival stockpiling, as well as an acceleration of exports before the full tariff rate of 50% took effect on August 27, may have added momentum to the quarter’s overall performance. Manufacturing output grew 9.1% during the period, signaling renewed resilience in industrial activity, while the construction sector posted a 7.2% rise after slightly stronger growth in the previous quarter.
However, government expenditure moderated in the three-month period, declining 2.7% compared with a 7.4% increase earlier. Despite this slowdown, authorities expect that a mix of steady consumer demand, ongoing public investment and moderating inflation will help support growth through the remainder of the 2025–26 fiscal year. Retail inflation dropped sharply to 0.25% in October, marking a record low and strengthening expectations that the Reserve Bank of India may introduce another interest rate cut during its December policy meeting.
Nominal GDP growth, which factors in inflation, registered 8.7% for the quarter, a marginal softening from 8.8% in the prior period. Economists cautioned that slower nominal growth could influence tax revenues and corporate earnings, though overall economic activity remains strong. Gross value added, viewed by many as a clearer measure of underlying performance, increased 8.1% compared with 7.6% in the April–June period.
The agriculture sector delivered stable, if slightly weaker, output, rising 3.5% compared with 3.7% previously. Policymakers anticipate that the combination of recent tax measures and cumulative rate reductions of 100 basis points this year will encourage additional private investment in the months ahead. The central bank expects the economy to expand 6.8% in the year ending March, though the latest quarterly data has prompted some analysts to revise their forecasts upward.
Earlier this week, Reserve Bank of India Governor Sanjay Malhotra signaled that further rate cuts remain possible as monetary authorities evaluate the evolving inflation environment. The upcoming review in December will determine whether the central bank continues its easing cycle to support growth, investment and broader economic stability.
