By Manoj Kumar and Sarita Chaganti Singh
NEW DELHI (Reuters) -India’s economy likely stayed resilient in the July–September quarter, driven by consumer demand and front-loading of production and exports ahead of U.S. tariffs, though growth is expected to moderate in the coming quarters.
Economists expect export activity benefitted from a rush to beat U.S. tariff increases implemented in late August, which doubled tariffs on imports of certain Indian goods to 50% over New Delhi’s Russian oil purchases.
To boost the domestic economy, Prime Minister Narendra Modi has pushed tax cuts and labour reforms while resisting U.S. demands to strike a trade deal by lowering tariffs across key sectors including agriculture.
Gross domestic product is expected to have grown 7.3% in July-September from a year earlier, down from 7.8% in the prior quarter, a Reuters poll of economists showed. At this pace, India would remain the fastest-growing major economy.
Economic activity as measured by gross value added (GVA), considered a more stable measure of growth by economists, was estimated to have expanded 7.15%, according to the poll.
The Ministry of Statistics will release GDP data for July-September, the second quarter of fiscal 2025/26, on Friday at 1030 GMT.
DOMESTIC DEMAND BOOST
Growth will be supported by private consumption and public investment, while private capital investments may slow due to global uncertainty, Kaushik Das, India chief economist at Deutsche Bank said.
Das expects 7.7% growth in the July-September period, moderating to 6.5% in October-December and 6.3% in January-March 2026.
A build-up in inventories ahead of the annual festival season, which kicks off in September, and a front-loading of exports ahead of U.S. tariffs could also have boosted growth, said Aditi Nayar, chief economist at rating agency ICRA.
However, economists warned that growth could slow in the second half of the financial year and beyond due to a high base effect and the impact of the tariffs.
The government said in its monthly economic report that India will withstand trade-related uncertainties and maintain growth through the rest of fiscal 2025/26, with the help of strong demand, steady public spending and easing inflation.
The International Monetary Fund (IMF) expects India’s economy to grow at an average pace of 6.6% in the fiscal year 2025/26 and 6.2% in the next financial year.
WEAK NOMINAL GROWTH
While India’s real, inflation-adjusted growth remains strong, subdued inflation has weighed on nominal growth, constraining tax collections, credit demand and corporate earnings, JP Morgan economists said in a note this month.
Benign inflation has created space for further monetary easing, amid strong economic growth, said Devendra Pant, chief economist at India Ratings and Research.
“To boost the nominal growth of the economy, the RBI may decide to cut the policy rate,” he said.
The Reserve Bank of India, which expects 6.8% growth this fiscal year, is expected to cut its key rate by 25 basis points to 5.25% on December 5, a Reuters poll showed.
(Reporting by Manoj Kumar & Sarita Chaganti Singh in New Delhi; Editing by Jacqueline Wong)
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