India’s growth engine is clearly firing on all cylinders again, with the economy projected to have expanded by a robust 7.3% in the second quarter of FY26 (July–September), driven primarily by a spirited rural revival, increased government capital expenditure, and a marked pickup in industrial momentum, according to a recent Economic Times poll of 12 leading economists.
This strong growth estimate, along with projections ranging between 6.9% to 7.7%, reflects India’s resilience and the success of policy efforts in sustaining momentum amid global uncertainties. The official GDP data from the National Statistical Office is due on November 28, and the Reserve Bank of India has pegged growth at 7% for the quarter, underscoring confidence that India will continue to lead as the fastest-growing major economy, outpacing both China and Western nations navigating a sluggish global recovery.
Unlike recent quarters where urban demand drove recovery, this quarter highlights a new growth story anchored by rural resilience. After facing erratic monsoon patterns and inflationary pressures, rural consumption is rebounding strongly, aided by moderating inflation, rising rural wages, and improved farm prospects.
Economists note a rare twin-engine effect as rural and urban demand have both firmed simultaneously. Yuvika Singhal from QuantEco Research attributes this to positive agricultural sentiment, lagged effects of monetary easing, income tax relief, and favorable kharif crop expectations boosting consumer confidence even in smaller towns and big cities alike. This rural demand revival happened despite challenges such as excessive rainfall, delayed sowing in northern states, and tariff pressures on exports to the US.
A key factor powering this growth has been the Modi government’s continued emphasis on capital expenditure. Government capex surged by 31% in Q2, following a 52% jump in Q1, substantially above last year’s 10% growth. This public spending supports rural infrastructure, employment generation, and stimulates private sector investment.
Industrial production also picked up sharply, with the Index of Industrial Production rising 4.1% compared to 2.7% a year earlier, and manufacturing output growing 4.9%. Economists credit this to pre-festive inventory build-up and the rationalization of the Goods and Services Tax (GST), which introduced a simplified two-rate structure (5% and 18%) from September 22. This measure eased tax burdens on household and durable consumer goods, triggering stronger consumption and retail activity.
Exports, too, showed notable growth, reversing last year’s declines, with merchandise exports up 8.8% in the quarter, buoyed by front-loaded shipments ahead of US tariff hikes. Though global uncertainties like elevated tariffs and tightening liquidity pose risks, the government’s proactive reforms and export facilitation measures have helped exporters weather international challenges. Negotiations for trade deals, especially with the US, continue with hopes of easing tariff pressures further, thereby supporting sustained export momentum.
Looking ahead, economists maintain a positive growth outlook for FY26, with median forecasts around 6.9%, in line with the RBI’s 6.8% projection and supported by World Bank and IMF forecasts ranging from 6.5% to 6.6%.
Domestic demand, especially consumption backed by government investment and rural upliftment, is expected to buffer external headwinds. However, sustaining consumption beyond the festive season remains an open question.
Under Prime Minister Narendra Modi’s leadership, a decade of strategic reforms has reshaped India’s growth trajectory. The government’s focus on rural prosperity—via MSP hikes, direct transfers, and social sector schemes like affordable housing and Ayushman Bharat—has raised rural living standards and significantly reduced poverty.
Simultaneously, infrastructure-led public investment programs, including PM GatiShakti and the National Logistics Policy, have enhanced connectivity and productivity, attracting private investment and fostering manufacturing growth. Corporate tax rationalization and GST reforms have further energized industry and consumption.
This inclusive, broad-based approach is driving a structural transformation, making India’s growth story uniquely resilient and promising. The current expansion is no longer dependent solely on urban consumption; rural revival, government capex, and reform-driven industrial growth are key pillars.
As India moves closer to becoming the world’s third-largest economy, these factors affirm the government’s commitment to delivering high-impact, sustainable growth that benefits all sections of society and positions India as a global economic leader in an uncertain world.
