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India’s GDP Growth Expected to Slow Down Amid Global Uncertainties

New Delhi: Despite headwinds from global economic uncertainties, high US tariffs, and volatile international markets, the Indian economy continues to grow at a healthy pace. However, recent reports suggest a potential slowdown in GDP growth for the July-September quarter.

Rating agency ICRA projects a 7% growth rate for the second quarter of fiscal year 2025-26, a decrease from the 7.8% recorded in the previous quarter. The agency attributes this anticipated dip primarily to a moderation in government spending.

SBI, however, offers a slightly more optimistic outlook, estimating a 7.5% GDP growth for the same period. The State Bank of India highlights positive factors such as increased rural consumption, a surge in investment, and the benefits of GST rate rationalization, all contributing to the Indian economy’s resilience.

While ICRA acknowledges potential moderate declines in the services and agriculture sectors, it expects the manufacturing and construction industries to maintain a robust performance, supported by favorable base effects. This industrial strength is expected to provide significant support to overall economic activity during the quarter.

Aditi Nayar, Chief Economist at ICRA, pointed out that slower year-on-year growth in government expenditure could weigh on the GDP and Gross Value Added (GVA) growth figures compared to the first quarter. She noted that pre-festive season stocking, increased demand from GST rationalization, and a surge in exports to the US before duty implementations are expected to bolster the manufacturing sector. Consequently, industrial GVA growth is likely to surpass that of the service sector for the first time in four quarters.

Earlier, India Ratings & Research (Ind-Ra) projected a 7.2% GDP growth for the second quarter of FY26, driven primarily by private consumption. It is important to note that the actual GDP growth rate for April-June was 7.8%, the fastest in five quarters, while the corresponding period in FY25 saw a growth rate of 5.6%.

Analysts and economists will be closely monitoring the upcoming GDP data for confirmation and further insights into the Indian economy’s trajectory amid the challenging global landscape.

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