Saturday 29 / November / 2025
New Delhi: India's economy expanded 8.2 per cent in Q2 FY26, the highest in six quarters, backed by strong growth in manufacturing, construction, and services, according to the latest SBI Research Ecowrap report. The data shows that India's economy is expected to grow at 7.6 per cent in FY26, driven largely by domestic demand and strong performance across manufacturing and services.
The report highlights that India's nominal GDP is on track to reach about USD 4.1 trillion by the end of FY26, marking another milestone in the country's economic journey. "With 8.0 per cent real GDP growth in H1 FY26, the overall growth for full fiscal would be approximately 7.6 per cent (Assuming 7.5 per cent-7.7 per cent in Q3 and 7 per cent in Q4)," the report said.
Nominal GDP grew by 8.7 per cent in Q2 FY26, higher than the 8.3 per cent recorded a year earlier. The gap between real and nominal GDP, which was 12 percentage points in Q1 FY23, has now narrowed to just 0.5 percentage points. Core Gross Value Added (excluding agriculture and public finance) rose 8.5 per cent, compared to 5.6 per cent last year.
The report underlines that growth is "largely domestic driven," supported by services exports and low inflation.
Labour-intensive sectors such as agriculture, manufacturing, construction, and personal and financial services have shown steady momentum. The agriculture sector grew 3.5 per cent, while industry expanded 7.7 per cent compared to 3.8 per cent a year ago. Manufacturing clocked a sharp 9.1 per cent rise, and the services sector grew by 9.2 per cent, led by gains in finance, real estate, and trade-related activities.
On the expenditure side, private consumption rose by 7.9 per cent and capital formation by 7.3 per cent, reflecting a sustained demand environment. Imports, especially of capital goods, rare earths, and chemicals, supported higher investment activity, while the contraction in valuables such as gold indicated a shift toward productive spending.
The most striking finding from SBI Research was the surge in MSME credit growth. Between FY2009 and FY2025, incremental MSME credit stood at Rs 19.87 lakh crore an annual average of Rs 1.17 lakh crore. In just the first seven months of FY26, this figure has already reached Rs 3.74 lakh crore. Extrapolating current trends, FY26 could see incremental MSME credit of Rs 6.4 lakh crore, roughly 5.5 times higher than the 16-year average.
This surge, according to the report, shows that India's growth is reaching deeper into its economic base, with small and medium enterprises playing a central role. With inflation remaining low and credit expanding, the report notes that the Reserve Bank of India may now focus on guiding rate expectations in its upcoming policy meeting while maintaining a neutral stance.
"With 7.6 per cent real GDP growth for FY26, our GDP is likely to cross USD 4 trillion by March'26 and for FY27 GDP is expected to be around USD 4.4 trillion. Thus, India is on the right track to reach USD 5 trillion by March'29," the report stated.
