The latest official data shows that India’s real GDP grew 8.2% year-on-year in the second quarter (July–September) of fiscal 2025–26 the fastest growth rate in six quarters and well above market expectations.

What Drove the Strong Growth

• The secondary (industry) and tertiary (services) sectors led the expansion: manufacturing and construction in the secondary sector posted healthy gains, while services — including financial, real estate and professional services — saw double-digit growth at constant prices.

• Private consumption demand remained robust. Growth in real private final consumption expenditure (PFCE) surged compared to last year, signalling healthy household demand and consumption momentum.

• The growth came even before the full effect of recent policy measures (like tax / consumption-led reforms) had fully played out suggesting underlying resilience in economic activity.

What This Means for the Economy & Markets

This strong Q2 performance reinforces India’s standing as one of the fastest-growing major economies. It boosts confidence in the growth outlook for FY26, potentially supporting investor sentiment, corporate earnings, and capital-market performance. The broad-based nature of the growth (industry + services + consumption) also suggests a balanced economic expansion.

For businesses and investors, sectors tied to manufacturing, consumer demand, infrastructure, real estate and services may benefit the most — especially firms that cater to domestic demand or have strong service/consumption exposure.

Important Context & What to Watch

While 8.2% is impressive, a few caveats and signals warrant careful monitoring:

• Nominal GDP growth (i.e. GDP growth not adjusted for inflation) also rose — but the difference between real and nominal growth matters for corporate revenues, inflation-linked valuations, and fiscal numbers.

• The sustainability of growth will depend on whether private investment and capex pick up, along with stable demand — especially given external headwinds globally.

• Government policy support, global trade conditions, commodity price trends, and domestic consumption behaviour will significantly influence whether this growth momentum can be sustained going into H2 FY26 and beyond.

What It Implies for Your Clients & Advisory Strategy

• Long-term equity investors — Companies in manufacturing, consumer goods, infrastructure, real estate, and services may remain attractive; this GDP growth supports a structural growth story.

• Fixed-income and debt exposure — Strong economic growth could support creditworthiness of firms, but watch for inflation/interest-rate risks if demand-led inflation kicks in.

• Portfolio positioning — With growth accelerating now, a balanced mix of growth-oriented equity, infrastructure/industrial themes, and defensive bets could make sense — especially for medium-to long-term investors.

• Client communication — Emphasise that the economy seems to be recovering on a broad front (not just one or two sectors), which strengthens India’s growth credentials — but also highlight the need to watch for volatility from global and policy headwinds.

  Source: MoneyControl