New Delhi, November 17 — India’s economy is expected to grow at 7.3% in the July–September quarter (Q2 FY2025-26), according to a new survey of 25 leading economists. The upbeat India Q2 growth forecast reflects stronger-than-expected rural demand, resilient government capital expenditure and improving manufacturing output at a time when global economic currents remain uncertain.
The projection, shared ahead of the official GDP release later this month, signals sustained economic resilience supported by a balanced mix of consumption, supply-side reforms and public investment.
Rural Revival Becomes the Quarter’s Breakout Story
Economists attribute a substantial portion of the Q2 momentum to a revival in rural demand, following two years of weakness. Better monsoon distribution in several states, improved reservoir levels, increased MSP support and consistent rural employment programmes appear to have lifted farm income and consumption.
Key rural indicators such as:
- two-wheeler sales,
- fast-moving consumer goods (FMCG) volumes,
- agriculture-related financing, and
- rural housing demand
All improved significantly between July and September.
Analysts note this rural comeback is crucial because it widens the base of economic recovery and supports overall consumption.
Government CapEx: The Backbone of the Growth Story
Government-led capital expenditure remained a core driver of growth. With states ramping up spending on highways, railways, irrigation, logistics parks and port infrastructure, the capex cycle is expected to contribute strongly to H1 FY26.
Over the last three fiscal years, India has maintained one of the highest public-investment intensities in its post-liberalisation history. This push continues to generate jobs, increase private-sector tendering and crowd in additional investments from foreign firms evaluating India as a stable manufacturing base.
“CapEx has lifted construction, cement, steel and allied sectors while generating rural and semi-urban jobs,” said a senior economist at a global financial institution.
Manufacturing Strengthens as Domestic Demand Surges
India’s manufacturing PMI rose sharply in October, but Q2 also benefited from earlier momentum. Domestic demand drove sectors like:
- automobiles,
- electronics,
- capital goods,
- chemicals,
- textiles, and
- pharmaceuticals
showing stable or expanding output levels.
The broader manufacturing trend points toward high-frequency recovery, even though global export demand remains subdued. India’s PLI (Production-Linked Incentive) sectors—electronics, solar modules and speciality chemicals—continue to attract investor interest.
Consumption Holds Up Despite Global Headwinds
Private consumption, which accounts for nearly 60% of GDP, showed stable to strong performance in Q2. Urban demand remained robust due to high GST collections, stable inflation and recovery in services such as hospitality, entertainment and travel.
Retail inflation has now eased to multi-month lows, helping to influence demand behaviour positively.
Economists say that while consumers remain cautious with discretionary spending, resilient essentials demand and festival-season expectations could provide additional lift.
Risks & Caveats Behind the 7.3% Projection
Although the India Q2 growth forecast paints a strong picture, economists caution against complacency. They identify several near-term risks:
1. Global Slowdown
Sluggish global growth, particularly in Europe and parts of Asia, could reduce India’s export momentum.
2. Commodity Uncertainty
Energy and food prices remain unpredictable, which may reintroduce inflationary pressures.
3. Private Investment Lag
While interest is rising, private corporate capex remains slower than desired.
4. Uncertain Monsoon Spillover Effects
Regional disparities in rainfall could still impact rural income in Q3.
Economists stress that India’s outlook is positive but not immune to global developments.
Policy Perspective & What Comes Next
The government has focused on maintaining capital expenditure while prioritising fiscal consolidation. With inflation moderating, the Reserve Bank of India (RBI) may find room to maintain or slightly shift its policy stance, depending on global conditions.
Industry leaders say the government’s continued investment in manufacturing, green energy and digital public infrastructure is likely to support medium-term growth.
Conclusion
India’s anticipated 7.3% GDP growth in Q2 signals strong macroeconomic fundamentals, especially amid global slowdown fears. With rural demand improving, manufacturing stronger and public investment remaining the backbone of economic growth, India enters Q3 with confidence.
Yet, the coming months will test the durability of this momentum, particularly as global shocks continue. For now, India’s Q2 performance offers a clear signal — the economy remains on a path of resilient expansion.
