India’s Q2 Economic Momentum strengthens as Inflation hits record lows
Q2 FY26 Growth Performance
I India’s economy is estimated to have expanded by 7.3% in Q2 FY26, in line with growth of 7.8% in Q1. Growth during the quarter was driven by stronger rural spending, improved agricultural output and steady government expenditure, even as urban demand and private investment remained relatively soft. Some boost might have also come from front-loaded surge in exports as firms expedited shipments ahead of the US tariff hike to 50% in late August. Industrial activity showed strength, services recorded mixed performance, and agriculture was affected by episodes of unseasonal rainfall. Despite global uncertainties, tariff wars and trade-related pressures, India continues to remain the fastest-growing major economy in the world, supported by resilient domestic demand and sustained public investment.
Inflation Trends
Retail inflation eased to a record low of 0.25% in October 2025, down from 1.54% in September, marking four consecutive months below the RBI’s 4% target. The decline reflects the full impact of GST cuts, a favourable base effect, and a steep 5% fall in food prices, the sharpest drop in over a decade. Prices of vegetables and pulses fell significantly, while core inflation remained stable at 4.3%, indicating steady underlying demand conditions.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
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