December 1, 2025 07:10 AM IST
First published on: Dec 1, 2025 at 07:10 AM IST
The Indian economy grew at a robust 8.2 per cent in the second quarter of the ongoing financial year, surpassing expectations by a mile. To put this number in perspective — the RBI had projected growth at 7 per cent for the quarter. While there are concerns over the economic momentum slowing down in the second half of the year — the central bank’s projections also point towards that — with growth in the first half of the year (April-September) now touching 8 per cent, the odds of the economy growing at more than 7 per cent over the full year have only increased.
The disaggregated data shows that agriculture grew at a healthy 3.5 per cent during the period. The sector’s performance is likely to continue as the impact of a good monsoon will be felt more in the second half. Manufacturing continued to grow at a robust pace, registering a growth of 9.1 per cent. In comparison, in the index of industrial production, the sector had averaged just under 5 per cent during this period. The services sector also showed robust growth, driven by financial, real estate and professional services. A recent study by economists at Bank of Baroda had estimated that while net sales of 1,221 companies grew by 6.3 per cent during the period, net profits grew by a solid 15.5 per cent. The latest data also reveals that while private spending and investments continued to grow at a healthy pace, government consumption expenditure was a drag. As per ICRA, the Centre’s non-interest non-subsidy revenue expenditure declined by 6.4 per cent during April-October. Nominal GDP has, however, grown at about 8.8 per cent in the first half of the year. In comparison, the Union budget 2025-26 had assumed a growth at 10.1 per cent. Lower growth will have implications for taxes, debt and deficit ratios.
The monetary policy committee is scheduled to meet in a few days from now. For several months, inflation has remained well below the RBI’s target, opening up space to cut rates. But the growth momentum has also been healthy. The full effects of the GST rate cuts — effective from September 22 — will be felt from the third quarter. There are already indications of private consumption picking up — sales of passenger vehicles and two-wheelers surged in October as per data from the Federation of Automobile Dealers Associations. But the impact of US President Donald Trump’s tariffs is also showing up — merchandise exports to the US fell 9 per cent in October. With inflation under control, the MPC’s views on growth should determine whether it opts to cut rates or not.
