November 28, 2025
Growth accelerated from 7.8% in the previous quarter, helped by a favourable deflator
Consumption was initially subdued ahead of GST cuts but rebounded sharply in October
Steeper US tariffs and rising gold imports pushed the goods trade deficit to a record high
Manufacturing, construction and domestic demand drove the improvement, alongside strong financial and real estate services
India recorded faster than expected economic growth of 8.2% in the quarter ending September, even though the period was partly affected by the 50% tariffs imposed by the United States. The expansion marked an acceleration from the previous quarter’s 7.8%, which had been flattered by an unexpectedly low deflator that boosted real growth. The deflator reflects how inflation influences the value of total output.
A Reuters survey of economists had anticipated growth of 7.3% for July to September. Nominal GDP, which does not adjust for inflation or deflation, rose 8.7% in the September quarter compared with 8.8% in the preceding quarter.
The government attributed the sharp improvement in growth to stronger manufacturing and construction activity and firmer domestic demand. Financial, real estate and professional services continued to deliver “substantial” momentum, expanding by 10.2% in the July to September period, according to the official release.
Neelkanth Mishra, chief economist at Axis Bank, told CNBC’s Inside India ahead of the data release that domestic consumption had been restrained during the September quarter as households awaited planned cuts to the goods and services tax. The 50% US tariff on Indian exports came into force in August, prompting New Delhi to roll out extensive GST reductions from 22 September to support demand.
Consumption strengthened sharply in October, reflected in record sales of automobiles and gold, as the GST cuts and earlier income tax reductions lifted disposable earnings. Despite this rebound, India’s goods trade deficit reached a new high due to weak exports and higher gold imports.
In its Wednesday report, the International Monetary Fund projected India’s real GDP to expand 6.6% in fiscal 2026 before easing to 6.2% in fiscal 2027, assuming continued delays in a US-India trade agreement. The IMF also forecast a 5.8% decline in India’s merchandise exports in fiscal 2026 to 416 billion dollars, alongside a 2.4% rise in goods imports to 746 billion dollars.
The Fund noted that India’s growth outlook remained robust despite external pressures, supported by favourable domestic conditions. It added that India was on course to become a five-trillion-dollar economy by fiscal 2029.
Source: CNBC