NEW DELHI—India’s economy grew at a robust 8.2% in the July-September quarter, its fastest pace in a year and a half, according to data released Friday by the Ministry of Statistics and Programme Implementation . The growth, which exceeded economist forecasts, was powered by a strong performance in manufacturing and services, coupled with resilient domestic consumer demand, helping the economy defy broader global slowdown trends . This acceleration marks India as the world's fastest-growing major economy and sets a positive tone for its full-year fiscal performance.

Sectoral Performance: Manufacturing and Services Lead the Charge

The second-quarter surge was primarily driven by the industrial and services sectors. The manufacturing sector expanded by a notable 9.1% year-on-year, a significant jump from the 2.2% growth recorded in the same quarter last year . The secondary sector as a whole, which includes manufacturing and construction, grew by 8.1% .

The services sector, a cornerstone of the Indian economy, also showed remarkable vigor. The broad tertiary sector grew by 9.2%, with the 'financial, real estate, and professional services' sub-segment posting a striking 9-quarter high growth of 10.2% . In contrast, agriculture growth was more moderate at 3.5%, reflecting the sector's steady but slower expansion .

The strength in industrial activity is further corroborated by the Index of Industrial Production (IIP), which registered a robust growth of 4.0% year-on-year in September, driven by a 4.8% expansion in manufacturing . Key contributors to this performance included the manufacture of basic metals, electrical equipment, and motor vehicles .

Demand-Side Drivers: Consumption and Investment Hold Firm

On the demand side, growth was supported by a broad-based recovery. Private Final Consumption Expenditure (PFCE), which represents household spending and accounts for nearly 60% of India's GDP, rose by 7.9% . This indicates a strengthening of consumer sentiment, particularly in rural areas, supported by easing inflation .

Investment activity, as measured by Gross Fixed Capital Formation (GFCF), remained resilient with a 7.3% growth, signaling continued momentum in capital expenditure . However, government spending contracted by 2.7% as authorities pursued fiscal consolidation . Net exports continued to be a drag on growth, with the negative contribution widening, partly due to global trade pressures .

The Inflation and Nominal GDP Puzzle

A key feature of the latest GDP data is the significant divergence between real and nominal growth. While real GDP, which is adjusted for inflation, grew by 8.2%, nominal GDP—which is not adjusted—grew at a slower pace of 8.7% . The narrow gap between the two figures implies a very low GDP deflator, a measure of economy-wide inflation, estimated at around 0.8% for the first half of the fiscal year .

This phenomenon is largely attributed to a period of remarkably low inflation. Data for October showed the Consumer Price Index (CPI) eased to 0.25%, its lowest level in the current series, while the Wholesale Price Index (WPI) was in negative territory at -1.21% . While low inflation boosts purchasing power, the subdued nominal GDP growth poses a potential challenge for the government's fiscal math, as tax collections are based on nominal values . Chief Economist Madan Sabnavis of Bank of Baroda noted this could make it "more difficult for the government to achieve its fiscal deficit target" which was pegged to a higher nominal growth assumption .

Policy Reforms and Global Headwinds

The current growth phase reflects the impact of recent policy measures. The government's Production Linked Incentive (PLI) scheme, designed to boost domestic manufacturing, has attracted investments of over ₹1.76 lakh crore, supporting output and exports . Recent rationalization of the Goods and Services Tax (GST) rates, effective late September, is also expected to bolster consumption further in subsequent quarters .

Despite the strong domestic performance, the economy faces external challenges. The imposition of 50% tariffs on most Indian products by the U.S. has begun to impact exports, with overall shipments falling 11.8% year-on-year in October . The International Monetary Fund (IMF) has cited these tariffs as a risk, recently trimming its growth forecast for India for the next financial year .

Labor Market and Outlook

The economic momentum is translating into improved labor market outcomes. The Labor Force Participation Rate (LFPR) climbed to a six-month high of 55.4% in October 2025, with the unemployment rate holding steady at 5.2% . The Naukri JobSpeak index, a gauge of white-collar hiring, also recorded a 10.1% year-on-year rise in September, led by a 61% surge in roles related to Artificial Intelligence and Machine Learning .

Looking ahead, the government has expressed strong optimism. Chief Economic Adviser V. Anantha Nageswaran stated that the first-half growth of 8% allows the government to "comfortably" project full-year growth to be "at least 7%" . Private economists have also revised their forecasts upward, with many now expecting growth to exceed 7% for the fiscal year, though they caution that the pace may moderate in the second half as base effects become less favorable and the full impact of global trade tensions unfolds .NEW DELHI, Nov. 29, 2025—India’s economy grew at a robust 8.2% in the July-September quarter, its fastest pace in a year and a half, according to data released Friday by the Ministry of Statistics and Programme Implementation . The growth, which exceeded economist forecasts, was powered by a strong performance in manufacturing and services, coupled with resilient domestic consumer demand, helping the economy defy broader global slowdown trends . This acceleration marks India as the world's fastest-growing major economy and sets a positive tone for its full-year fiscal performance.

Sectoral Performance: Manufacturing and Services Lead the Charge

The second-quarter surge was primarily driven by the industrial and services sectors. The manufacturing sector expanded by a notable 9.1% year-on-year, a significant jump from the 2.2% growth recorded in the same quarter last year . The secondary sector as a whole, which includes manufacturing and construction, grew by 8.1% .

The services sector, a cornerstone of the Indian economy, also showed remarkable vigor. The broad tertiary sector grew by 9.2%, with the 'financial, real estate, and professional services' sub-segment posting a striking 9-quarter high growth of 10.2% . In contrast, agriculture growth was more moderate at 3.5%, reflecting the sector's steady but slower expansion .

The strength in industrial activity is further corroborated by the Index of Industrial Production (IIP), which registered a robust growth of 4.0% year-on-year in September, driven by a 4.8% expansion in manufacturing . Key contributors to this performance included the manufacture of basic metals, electrical equipment, and motor vehicles .

Demand-Side Drivers: Consumption and Investment Hold Firm

On the demand side, growth was supported by a broad-based recovery. Private Final Consumption Expenditure (PFCE), which represents household spending and accounts for nearly 60% of India's GDP, rose by 7.9% . This indicates a strengthening of consumer sentiment, particularly in rural areas, supported by easing inflation .

Investment activity, as measured by Gross Fixed Capital Formation (GFCF), remained resilient with a 7.3% growth, signaling continued momentum in capital expenditure . However, government spending contracted by 2.7% as authorities pursued fiscal consolidation . Net exports continued to be a drag on growth, with the negative contribution widening, partly due to global trade pressures .

The Inflation and Nominal GDP Puzzle

A key feature of the latest GDP data is the significant divergence between real and nominal growth. While real GDP, which is adjusted for inflation, grew by 8.2%, nominal GDP—which is not adjusted—grew at a slower pace of 8.7% . The narrow gap between the two figures implies a very low GDP deflator, a measure of economy-wide inflation, estimated at around 0.8% for the first half of the fiscal year .

This phenomenon is largely attributed to a period of remarkably low inflation. Data for October showed the Consumer Price Index (CPI) eased to 0.25%, its lowest level in the current series, while the Wholesale Price Index (WPI) was in negative territory at -1.21% . While low inflation boosts purchasing power, the subdued nominal GDP growth poses a potential challenge for the government's fiscal math, as tax collections are based on nominal values . Chief Economist Madan Sabnavis of Bank of Baroda noted this could make it "more difficult for the government to achieve its fiscal deficit target" which was pegged to a higher nominal growth assumption .

Policy Reforms and Global Headwinds

The current growth phase reflects the impact of recent policy measures. The government's Production Linked Incentive (PLI) scheme, designed to boost domestic manufacturing, has attracted investments of over ₹1.76 lakh crore, supporting output and exports . Recent rationalization of the Goods and Services Tax (GST) rates, effective late September, is also expected to bolster consumption further in subsequent quarters .

Despite the strong domestic performance, the economy faces external challenges. The imposition of 50% tariffs on most Indian products by the U.S. has begun to impact exports, with overall shipments falling 11.8% year-on-year in October . The International Monetary Fund (IMF) has cited these tariffs as a risk, recently trimming its growth forecast for India for the next financial year .

Labor Market and Outlook

The economic momentum is translating into improved labor market outcomes. The Labor Force Participation Rate (LFPR) climbed to a six-month high of 55.4% in October 2025, with the unemployment rate holding steady at 5.2% . The Naukri JobSpeak index, a gauge of white-collar hiring, also recorded a 10.1% year-on-year rise in September, led by a 61% surge in roles related to Artificial Intelligence and Machine Learning .

Looking ahead, the government has expressed strong optimism. Chief Economic Adviser V. Anantha Nageswaran stated that the first-half growth of 8% allows the government to "comfortably" project full-year growth to be "at least 7%" . Private economists have also revised their forecasts upward, with many now expecting growth to exceed 7% for the fiscal year, though they caution that the pace may moderate in the second half as base effects become less favorable and the full impact of global trade tensions unfolds .