The robust consumption growth was also validated by revenue performance in the second quarter
The Indian economy has performed stupendously well in the July-September quarter, registering a six-quarter high growth rate of 8.2 per cent, largely powered by a better-than-expected expansion of the secondary and tertiary sectors. The pace of economic growth is particularly encouraging as it was achieved amidst unprecedented US tariffs imposed on Indian goods since August 27 and a contraction in government consumption.
According to the ministry of statistics and programme implementation, the secondary sector grew by 8.1 per cent, while the tertiary sector expanded by 9.2 per cent. In the secondary sector, manufacturing led the way by posting 9.1 per cent growth, followed by the construction sector at 7.2 per cent. Financial, real estate, and professional services topped the tertiary sector, posting 10.2 per cent growth in the period under review.
The manufacturing sector was on steroids, ramping up output to meet higher export demand before the penal US tariffs kicked in and to serve domestic demand boosted by the lowering of the Goods and Services Tax. As a result, exports grew by 11 per cent in Q2 FY26, compared to 4.8 per cent in the corresponding quarter of the previous year.
Real private final consumption expenditure (PFCE) posted a 7.9 per cent growth rate during Q2 of FY 2025–26, compared to 6.4 per cent in the corresponding period of the previous financial year. Private consumption now contributes 64.75 per cent of GDP — the highest in the last 10 years — while government consumption has proportionately shrunk, both of which augur well for the economy.
The robust consumption growth was also validated by revenue performance in the second quarter. An analysis of financial results announced by publicly listed companies shows that corporate India recorded 9.2 per cent revenue growth in Q2 FY26. The growth was supported by consumption-led sectors such as retail, hotels, and automobiles, and by infrastructure-oriented sectors such as capital goods and cement.
After the front-loading of demand, the economy could see a marginal dip in export demand in the third quarter. However, the signing of the US–India bilateral trade agreement, whose first tranche is reportedly in the final stages, could provide a major boost to the economy. Similarly, the free trade agreement between India and the European Union is expected to be concluded by the year-end, giving a strong impetus to the Indian manufacturing and services sectors.
Despite being opposed in some quarters, the new labour code is expected to lay the groundwork for companies to meet overseas demand, which could emerge in the wake of the free trade deals that India is negotiating with the US, the EU, the Gulf Cooperation Council and the Eurasian bloc.
While India’s economic fundamentals remain strong, the government must remain vigilant about the uncertain global trade outlook and step up investments to enhance the global competitiveness of Indian talent and build patented products that cannot be replicated elsewhere.
