Last Updated on November 28, 2025 5:24 pm by BIZNAMA NEWS
By R. Suryamurthy
India’s economy outpaced expectations in the July–September quarter, posting a robust 8.2% real GDP growth. However, detailed data released by the National Statistical Office (NSO) reveals that the momentum is being driven disproportionately by industry and services, while agriculture and utilities continue to underperform and drag on the overall recovery.
The Q2 numbers, released on Friday, indicate an economy still benefiting from a broad cyclical upswing and strong corporate performance. Yet they also highlight emerging structural gaps that could become more pronounced when the GDP series is rebased early next year, potentially reshaping long-term growth patterns and sectoral weights.
Industry and Services Power the Upside
Real GDP rose to ₹48.63 lakh crore in Q2, from ₹44.94 lakh crore a year earlier. The real GVA print — generally viewed as a cleaner indicator of underlying economic activity — grew 8.1%, boosted by manufacturing (9.1%) and a buoyant services ecosystem led by financial, real estate and professional services (10.2%).
The manufacturing sector’s strong showing aligns with indicators such as higher steel consumption, improved cement output, and Q2 earnings from listed companies. These gains signal not just cyclical recovery but also tentative supply-chain stabilisation amid better demand visibility.
Construction, growing at 7.2%, continues to reflect public capex support and sustained real-estate activity in urban markets. Meanwhile, the services sector’s 9.2% expansion points to a demand pivot back towards contact-intensive and logistics-oriented activities: air passenger traffic increased, port cargo improved, and GSTN data showed a steady rise in outward supplies.
Agriculture’s Moderation Persists
The primary sector’s 3.5% rise highlights the economy’s most persistent drag. First advance estimates for crop output have yet to signal a broad revival, and the monsoon’s uneven temporal and spatial spread has depressed prospects for several major crops. With rural incomes still recovering in patches, the slower agricultural GVA mirrors the fragility on the consumption side of the economy.
Utilities, too, grew only 4.4%, reflecting subdued electricity demand growth relative to industrial expansion — a dissonance that suggests supply-side efficiencies rather than broad-based consumption-led pressure.
Consumption Strengthening, but Not Broad-Based
Private final consumption expenditure (PFCE) grew 7.9%, a clear improvement over the 6.4% growth in Q2 last year. Yet the improvement likely reflects urban-focused demand: higher credit uptake, insurance activity and premium discretionary spending. Rural consumption, which forms the largest component of India’s demand base, remains uneven, given the muted agricultural backdrop and rising price pressures in key food segments.
Government consumption remains a stabiliser, with the Centre and states maintaining expenditure momentum through revenue spending and subsidies. The external sector contribution continues to be shaped by modest export recovery and still-firm imports.
H1 Growth Accelerates, but Questions Loom
For the first half of FY26, real GDP grew 8.0%, compared with 6.1% a year earlier. Real GVA rose 7.9%. Industry and services together account for the bulk of this acceleration, while primary sector weaknesses risk pulling down full-year growth if crop output does not improve meaningfully in the rabi season.
The NSO’s methodology notes that the estimates rely on a broad set of indicators — industrial production, financial results, GST data, freight movement, government spending and banking trends — but also acknowledges that subsequent revisions are likely. With the shift to a new base year (2022-23) scheduled for February 2026, analysts expect historical growth trajectories, sectoral weights and deflators to undergo material changes.
A Strong Quarter, but Not Without Caveats
The headline print offers a compelling narrative: an economy growing above 8% for the second consecutive quarter, anchored by a post-pandemic services boom and a manufacturing upswing supported by supply-chain recovery. Yet the divergence between sectors — strong urban demand against subdued rural consumption, high-value services outperforming basic utilities, and manufacturing outpacing agriculture — suggests that the recovery remains asymmetric.
Much now hinges on whether rural demand catches up, credit conditions remain supportive, and global trade stabilises sufficiently to aid India’s still-fragile export recovery. For now, Q2 stands out as a high-growth quarter, albeit one resting on pillars stronger in some parts of the economy than others.