GST cuts boost demand as India posts 8.2% GDP growth, US tariff risks loom: Economists

New Delhi [India], November 28 (ANI): The Indian Economy has shown a stellar growth trajectory as the real GDP is estimated to have grown by 8.2% in the July-September quarter of the financial year 2025-26, as per the data released by the National Statistics Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI).
The growth numbers are higher than the same period of the previous fiscal, which was recorded at 5.6%.
Reacting to the GDP numbers, Bank of Baroda Economist, Aditi Gupta, said the boost to growth came from a rebound in the manufacturing sector. At the same time, the services sector continued to show momentum.
"Private consumption too expanded at a healthy pace, even as government expenditure contracted. In H2, the economy is likely to be supported by robust consumption demand due to GST rate cuts and festive demand. Manufacturing production has recovered, while the agriculture and services sectors have continued on a steady growth path," Gupta said.
Highlighting the impact of US tariffs, she said higher US tariffs could have a negative impact on growth if the trade deal is delayed further. "Some of this is likely to be offset by the resilience in services exports. Taking all this into account, we are revising our growth forecast upwards to 7.4%-7.6% for FY26. Given the buoyancy in the economy, the possibility of a rate cut in Dec'25 looks limited."
SBICAPS, in its report on the GDP numbers, credited the above-normal monsoon, buoyancy in the services sector, GST rate rationalisation, and strong construction activity for the accelerated growth momentum despite trade tariff uncertainty and selective private-sector capex. "The risks remain evenly balanced as we expect FY26 real GDP growth to be > 7% with slight moderation in H2. Nominal GDP will remain challenged in FY26 as inflation sinks, and we expect ~8.5% y/y figure to register," it said.
Mentioning the impact of the US tariff, SBICAPS said that while the additional 25% tariff by the US could temporarily weigh on goods exports, stable global growth would partially offset the goods trade deficit due to services export and remittances.
"In the interim, subdued commodity prices, ample forex reserves, and prudent external account management should continue to anchor balance of payments stability. With global headwinds intensifying, foreign flows--both FDI and FII--would remain volatile, a trend we are watching with keen interest," the report said.
Rajeev Juneja, President of PHDCCI, said, "The persistent and consistent GDP growth of India reflects significant policy steps undertaken by the government towards Viksit Bharat@2047. The YoY growth is showing a consistent uptrend in GDP at market prices for the last four consecutive quarters."
"Based on sequential quarter-on-quarter growth, GDP growth after a dip in Q1 FY2025-26 (-6.7%) is moving towards its long-term mean reversion growth rate of 1.7%. India's GDP trajectory is also being supported by robust consumption, and a planned decrease in MPC rates along with a softening trend of CPI and WPI inflation," he added.
Calling the GDP performance an affirmation of the nation's strong economic resilience, Nirmal Kumar Minda, President, ASSOCHAM, said, "By improving on the previous financial year's 2nd quarter growth rate of 5.6% and outperforming expectations, the latest data underscores the strength of India's economic fundamentals. Broad-based expansion across major sectors and improving domestic demand show how policy stability and reforms are translating into real growth."
"Even in a challenging global environment, the government has ensured resilience and confidence, keeping India among the world's fastest-growing major economies."
Global Trade Research Initiative (GTRI) Founder Ajay Srivastava, praising the growth, said the momentum will help absorb some workers displaced from export-heavy sectors such as garments, seafood, and gems after U.S. tariffs choked off orders.
"But domestic demand cannot substitute for lost foreign markets in labour-intensive industries that survive on scale. India must work to secure a trade rebound, else it risks creating a two-speed economy: gleaming services and infrastructure alongside a shrinking export manufacturing base," he said.
"Recent reforms--rollback of QCOs, GST rationalisation and labour changes--will help revive competitiveness, but without relief on U.S. tariffs and a push into global markets, GDP growth alone will not rebuild India's export engine," he added. (ANI)