Key Takeaways
- Q2 GDP growth projected at 7-7.5%, exceeding RBI’s full-year estimate
- Strong rural consumption drives growth despite urban demand slowdown
- Official data to be released on November 30
India’s economy remains robust with second-quarter GDP expected to grow between 7-7.5%, driven by strong rural consumption fueled by low inflation and GST rationalization. While this marks a slight moderation from Q1’s 7.8% growth, it still surpasses the Reserve Bank of India’s full-year FY26 projection of 6.8%.
Bank Projections and Growth Drivers
State Bank of India projects Q2 GDP at 7.5%, citing multiple positive factors. “Growth is being supported by a pick-up in investment activities, recovery in rural consumption, and buoyancy in services and manufacturing,” the bank noted in its report.
SBI highlighted that 83% of leading indicators showed acceleration in Q2, up 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,” the report stated.
Rural Economy Shows Strong Momentum
IDFC First Bank chief economist Gaura Sen Gupta observed improved growth momentum even before GST cuts took effect. “Pick-up in rural demand indicators have become broad-based supported by rise in rural wages and second consecutive year of good monsoons,” she said.
The data supports this optimism: tractor sales jumped 31% year-on-year in Q2, while FMCG sales volume grew 7.7%. Rural labor markets also improved significantly, with sharp decline in demand for NREGA jobs since July 2025.
IDFC First Bank estimates Q2 GDP growth at 7.3%.
Urban Demand Concerns and Sectoral Performance
Despite rural strength, urban demand showed weakness during Q2. Passenger vehicle sales declined 1.5% year-on-year, while FMCG sales value growth slowed to 3.7%. Sen Gupta attributes this to “slowdown in real wage growth since FY25 and reduction in household savings.”
Icra chief economist Aditi Nayar projects a more conservative 7% GDP expansion for Q2, down from 7.8% in Q1. She attributes the moderation primarily to services sector growth slowing from 9.3% to 7.4% and agriculture sector growth easing to 3.5% from 3.7%.
Nayar notes these declines “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%.”
