ECONOMY
Q2 FY26 GDP surges by 8.2% on rural demand, farm output, manufacturing
- IBJ Bureau
- Nov 29, 2025
The economy delivered a surprisingly-strong performance in the July-September quarter, with GDP rising 8.2 per cent year-on-year. The growth saw a sharp jump from 5.6 per cent in the same period a year earlier and well above most market forecasts.
The growth acceleration signals a clear recovery from the softer momentum seen earlier in the financial year, underscoring resilience in parts of domestic demand, while also revealing persistent weaknesses in investment and urban consumption.
The expansion was primarily powered by a broadening of rural demand. Higher agricultural output, steady farm incomes and improving labour market conditions across rural districts strengthened private consumption, which remains a core pillar of India’s GDP.
The strong performance was also largely attributed to boost in the manufacturing sector and significant growth in the secondary sectors. Manufacturing grew by more than four times in this sector, rising by 9.1 per cent in this quarter, which previously stood at 2.2 per cent a year ago. Construction followed a significant growth of 7.2 per cent.
In absolute terms, the real GDP for Q2 of 2025-26 is estimated at Rs 48.63 lakh crore, up from Rs 44.94 lakh crore in the same quarter last year. The nominal GDP for the quarter witnessed growth of 8.7 per cent as it is estimated at Rs 85.25 lakh crore.
Despite the headline optimism, underlying concerns continue to shape the growth narrative. Private sector capital expenditure remained sluggish, reflecting caution among companies that are balancing stretched valuations, uneven credit demand and slower urban sales trends.
The lack of a sustained capex cycle means the current growth is more reliant on fiscal support and rural consumption rather than organic investment-led expansion. Urban demand also trailed the recovery, especially in segments linked to higher-end consumption such as real estate in premium micro-markets, passenger vehicle demand, retail footfall for discretionary brands and new project announcements in private infrastructure.
The combination of subdued urban consumption and cautious corporate spending raises questions about the durability of this strong real growth once government spending normalises.
Market analysts interpret the quarter as a tale of divergence. Core consumption in rural India and public sector spending have provided the economy with its strongest anchors, while private investment and urban demand are yet to show a convincing rebound.
Report By
View Reporter News