India’s Economy Surges to 8.2% in Q2FY26: Can the Growth Momentum Last?

India delivered another major growth surprise in Q2FY26, recording an 18-month high GDP expansion of 8.2%, according to fresh estimates from Emkay Research. The brokerage attributed the performance to a combination of favourable statistical effects, improving consumption, strong services activity, and resilient manufacturing output.

“2Q real GDP growth at 8.2% was a positive surprise,” wrote Madhavi Arora, Chief Economist at Emkay Research, noting the role of “statistically favorable deflator effects” and “lagged effects of monetary and regulatory easing.” Emkay has now raised its FY26 GDP growth forecast to 7.3%, significantly higher than its earlier 6.5% estimate and above the RBI’s 6.8% projection.

Services Sector Leads the Upside, Manufacturing Rebounds
Gross Value Added (GVA) growth came in at 8.1%, powered by a robust 9.2% rise in Services. Sub-sectors including Financial & Real Estate grew 10.2%, while Public Administration, Defense & Others expanded 9.7%.

Interestingly, the research notes that the services deflator—derived using WPI, dropped sharply, further magnifying real services growth.

Read more - Anil Ambani Appeals To Supreme Court Against SBI Fraud Tag

Industry also strengthened, with manufacturing rising 9.1%, aided by “frontloaded exports to the US ahead of the tariff deadline” and lower input costs. Agriculture posted steady 3.5% growth.

Consumption Recovers, Government Spending Contracts
On the expenditure side, private consumption climbed to 7.9%, signalling a possible revival in purchasing power. However, government consumption fell 2.7%, reflecting tighter revenue expenditure in the second quarter.

Investment activity remained firm, with GFCF rising 7.3%, supported mainly by strong central and state capex.
Exports rose 5.6%, but a sharper 13% rise in imports meant net exports remained a drag.

Full-Year Outlook Upgraded, But Second-Half Slowdown Expected
Emkay expects growth momentum to spill into Q3, aided by higher real incomes and the GST reset. But the firm cautions that 2H growth is likely to moderate to around 6.7%, compared to 8% in the first half.

A potential US-India trade/tariff deal could lift exports and improve the outlook, the report noted.
 

However, Emkay flagged concerns around sub-8% nominal GDP growth, a key figure for macro targets such as fiscal deficit, sovereign debt ratios, credit growth, and earnings. “Any slippage on nominal growth would imply much higher compression of fiscal deficit to achieve similar debt/GDP outcomes, it warned.