The economy continues to be on a strong footing as analysts expect the second quarter GDP to grow at 7-7.5% boosted by high rural consumption as a result of low inflation and GST rate rationalisation. Though the second quarter GDP growth is estimated to be lower than the first quarter number of 7.8%, a growth of more than 7% growth in the second quarter would still be higher than the RBI’s FY26 estimate of 6.8%.
The government will release the Q2 GDP growth numbers on November 30.
State Bank of India, which estimated the Q2 GDP at 7.5%, feels growth is being supported by a pick-up in investment activities, recovery in rural consumption, and buoyancy in services and manufacturing, underpinned by structural reforms like GST rationalisation that also helped unleash a festive spirit that decisively showcased the triumph of hope over hype.
“In continuum of the good numbers from festive led sales, percentage of leading indicators in consumption and demand across Agri, Industry, service showing acceleration has increased to 83% in Q2 from 70% in Q1. Based on the estimated model, we obtain a forecast of real GDP growth of 7.5% in Q2FY26 with possibility of an upside surprise,” it said in its report.
According to IDFC First Bank chief economist Gaura Sen Gupta, high-frequency growth indicators are showing improved growth momentum in Q2FY26, even before the GST cuts. “Pick-up in rural demand indicators have become broad-based supported by rise in rural wages and second consecutive year of good monsoons. Tractor sales jumped by 31%YoY in Q2FY26 and 7.7% rise in FMCG sales volume growth. Labour market conditions in rural areas have improved with sharp decline in demand for jobs under NREGA since July 2025 onwards,” she says. IDFC First Bank estimates the Q2 GDP likely to have grown at 7.3%.
Gaura Sen Gupta, however, flags weakness in urban demand during Q2FY26 with a decline in passenger vehicle sales (-1.5%YoY) and further slowdown in FMCG sales value growth to 3.7%YoY. The weakness in urban demand reflects slowdown in real wage growth since FY25 and a reduction in household savings.
Icra chief economist Aditi Nayar, however, says the GDP expansion is likely to have eased to 7% in Q2 from 7.8% in Q1 of the current fiscal, primarily because of lower expansion in the services sector from 9.3% in Q1 to 7.4% in Q2 and of the agriculture sector to +3.5% from +3.7%, which she says will likely outweigh a pick-up in the performance of the industrial sector to 7.8% which will be a five-quarter high from 6.3%.
(By Dipak Mondal of The New Indian Express)
