How India posted strong Q2 growth amid low-inflation tailwinds

India’s economy posted strong growth in Q2 FY26, with real GDP rising 8.2 percent, supported by robust manufacturing, construction, and services. Low inflation compressed the GDP deflator, boosting real growth but weakening nominal momentum. Consumption and investment improved, though government spending contracted and revenue growth remained subdued. External risks persist, including US tariff hikes, weak global demand, and geopolitical uncertainty. Despite these challenges, policy reforms in deregulation, GST rationalisation, and trade negotiations are expected to enhance productivity and stability. The key tasks ahead are sustaining consumption, broadening private investment, restoring fiscal space, and strengthening rural demand to complement urban growth.