India's Unstoppable Ascent: An 8.2% Surge Defies Global
Headwinds
The Global Outperformer: 8.2% Growth Defies Global Headwinds
In a period marked by persistent global volatility and
increased uncertainties, notably stemming from US Trade Tariffs, the Indian
economy has once again demonstrated extraordinary resilience and dynamism. The
latest official statistics confirm India’s status as the world’s
fastest-growing major economy.
According to the National Statistics Office (NSO), Ministry
of Statistics and Programme Implementation (MoSPI), the Real Gross Domestic
Product (GDP) for the Second Quarter (Q2) of the Financial Year 2025-26
(July-September) is estimated to have grown at a robust 8.2%. This impressive
figure surpasses the growth rate of 5.6% recorded in the corresponding quarter
of the previous fiscal year and marks the highest growth rate achieved in six
quarters.
The momentum is not isolated, translating into a strong
performance across the first half (H1) of the fiscal year, which registered an
overall Real GDP growth of 8.0%. This accelerating pace is a testament to
decisive domestic policymaking and structural reforms, effectively insulating
the economy from external shocks. The Tertiary (Services) Sector and the
Secondary Sector have acted as twin engines, clocking growth rates of 9.2% and 8.1%
respectively in Q2, indicating a broad-based and healthy expansion.
The decisive factors underpinning this high-octane growth
stem from a multi-pronged approach focusing on enhancing the economy’s
fundamental strength. This includes bolstering financial stability, leveraging
digital public infrastructure, and prioritizing transformative capital
expenditure, ensuring that India’s economic growth is not just rapid, but
sustainable and deeply rooted.
The Engine of Demand: Consumption Power and Historic Low
Inflation
The most critical factor driving India’s current growth
narrative is the robust revival and sustained momentum of Private
Consumption, which remains the primary driver of economic expansion.
Statistics released by MoSPI underline this strength: Real
Private Final Consumption Expenditure (PFCE) registered a significant
growth rate of 7.9% in Q2 of FY 2025-26. This is a substantial jump
compared to the 6.4% growth witnessed in the same period a year prior,
signalling increased consumer confidence and purchasing power across the
nation.
This surge in demand is inextricably linked to the
government’s successful efforts in managing price stability. Inflation has
reached very low levels, a key objective of monetary policy framework
implemented over the last few years.
- Historic
Low Inflation:
The Consumer Price Index (CPI) inflation for October 2025 eased
dramatically to just 0.25% year-on-year. As per official data from the
government, this reading marks the lowest year-on-year inflation recorded
in the current CPI series, effectively one of the lowest in India’s
history.
- Food
Price Stability:
The moderation in prices is widespread, with the Consumer Food Price Index
(CFPI) registering a deflation of (-)5.02% in October 2025.
- Fiscal
Support: This
benign inflationary environment has been further supported by prudent
fiscal measures, including the reduction in GST rates for many
products/services. These policy actions have directly translated into
higher real incomes for households, boosting discretionary spending, and
fortifying the foundations of the domestic demand story.
Firing Up the Multiplier: Unprecedented Infrastructure
Investment
A core pillar of India’s economic strength is the Continued
high investment in infrastructure by the Government. This strategic focus
on capital expenditure (Capex) has a large multiplier effect, stimulating
demand across core industrial sectors, generating employment, and enhancing
long-term productive capacity.
The Union Government’s commitment to this growth-enabling
strategy is reflected in its ambitious budgetary allocations. For instance, the
Budget Estimate (BE) for Capital Expenditure in FY 2023-24 was set at a
staggering ₹10 lakh crore, marking a sharp increase of 37.4% over
the previous year. This tripling of Capex relative to FY 2019-20 highlights a
deliberate shift from consumption-led spending to investment-led growth. The capex
so far by the Government, far exceeds the last year’s level.
The impact of this infusion is clearly visible in industrial
data (PIB):
- Sectoral
Boost: The Construction
sector, a key recipient of this public expenditure, registered a strong
growth rate of 7.2% in Q2 FY 2025-26.
- Industrial
Momentum: From
a 'Use-based classification' perspective (NSO, MoSPI), the Infrastructure
& Construction Goods segment of the Index of Industrial Production
(IIP) expanded robustly by 10.5% in September 2025, underscoring
the strong linkage between government spending and industrial output.
This sustained government investment, channelled through
ambitious projects like the National Infrastructure Pipeline (NIP) and Gati
Shakti, is rapidly transforming India's physical and digital infrastructure,
creating a globally competitive economic landscape.
The Financial Fortification: Structural Reforms and Banking
Health
The remarkable economic growth trajectory is built upon a Financial
Stability that has significantly improved year on year, a direct outcome of
reforms implemented over the last few years. The clean-up of the banking sector
has transitioned it from a source of vulnerability to a pillar of economic
strength.
Key statistics from the Reserve Bank of India (RBI) and
Ministry of Finance (MoF) highlight this transformation:
- Non-Performing
Assets (NPA) at 12-Year Low: The Gross Non-Performing Assets (GNPA) ratio of
Scheduled Commercial Banks (SCBs) has seen a spectacular decline. The GNPA
ratio fell to a 12-year low of 2.6% in September 2024, down from a peak of
14.58% in March 2018 (RBI Financial Stability Report). The GNPA ratio for
Public Sector Banks (PSBs) stood at 2.58% in March 2025 (PIB). This
signals a profound improvement in asset quality, balance sheet health, and
credit discipline.
- Strong
Capital Buffers:
The Capital to Risk (Weighted) Assets Ratio (CRAR) of PSBs rose
significantly to 15.43% in September 2024, far exceeding the RBI's minimum
requirement, thus ensuring that the banking system is robust,
well-capitalized, and positioned to meet the credit demands of a rapidly
expanding economy.
The proactive focus on financial stability has resulted in
record profitability for Public Sector Banks, enabling them to support the
credit flow required for the Manufacturing Sector, which in turn
registered a strong growth of 9.1% in Q2 FY 2025-26.
The Digital Dividend and Policy Agility
India’s macroeconomic strength is increasingly being driven
by a powerful synergy between technology and governance, creating efficiencies
that fuel growth.
- Digital
Public Infrastructure (DPI) and Fiscal Gains: The Digitisation of Procedures
and wider use of Digital Public Infrastructure (such as the Unified
Payments Interface, GSTN, and Aadhaar-based systems) has been instrumental
in formalizing the economy and improving tax compliance. This
modernization has led to a sustained increase in collection of taxes,
providing the government with the fiscal space necessary for its high
capital expenditure program. The Goods and Services Tax (GST) system,
backed by digital infrastructure, has seen record collections,
demonstrating enhanced tax buoyancy and efficiency.
- New
Tax Slabs:
Policy tweaks, such as the introduction of new Tax slabs by the government,
have been calibrated to put more money in the hands of consumers, further
reinforcing the private consumption engine (PFCE) .
Crucially, the government's economic management has been
characterized by Policy Agility, a key learning outcome from the past. The
experience gained during COVID on managing uncertainty has come to the help of
managing the present volatile Global Scenario. The swift, targeted, and
localized policy responses during the pandemic, followed by a confident shift
to investment-led growth, have equipped policymakers with a superior framework
for navigating complex international trade dynamics and global supply chain
disruptions. This mix of structural stability, digital efficiency, and dynamic
policy steering positions India not just as a global growth leader today, but
as a model of economic resilience for the future.
