MUMBAI: Following the much-higher-than-expected GDP growth in the second quarter, which came in at 8.2%, a full 120 bps more than the RBI estimate, SBI economists have revised up the forecast for the full fiscal to 7.6% from their earlier estimate of 7.5%.
Most other analysts see the economy losing steam in the second half as the base effect wanes and the positive impacts of front-loading exports -- to skirt the higher US tariffs -- in the first half and the second quarter in particular will not be there. As a result, the consensus forward-looking reading of the growth expansion is 6.8-7% for the full fiscal.
At 8.2%, the economy grew at the fastest pace in the previous six quarters. In the comparative period in FY25, the economy had grown at a low 5.6%.
In a report, Soumyakanti Ghosh, the chief economic advisor to SBI, said GDP growth will be 7.5–7.7% in the December quarter and 7% in the March quarter. So far, in the first half, the economy grew at 7.8% in Q1 and 8.2% in Q2.
“With a 7.6% real GDP growth projection for FY26, GDP is likely to cross the $4-trillion-mark by March 2026 and $4.4 trillion by FY27, putting the economy on the right track to reach $5 trillion by March 2029,” he said.
Nominal GDP expanded 8.7% in Q2, higher than 8.3% in the same quarter last year. The gap between real and nominal GDP, which was as high as 12 percentage points in Q1 FY23, has narrowed sharply to 0.5 percentage points in Q2 FY26. Manufacturing and services drove the strong performance, growing by 9.1% and 9.2% respectively.
The economy remains largely domestically driven, supported by services exports, low inflation and value-added expansion in labour-intensive sectors, Ghosh said.
Q2 demand was anchored in private consumption, which grew 7.9%, while capital formation rose 7.3%. Despite the tariff hits, exports grew 5.6%, showing a sequential moderation but a year-on-year improvement, indicating a mixed trend in external demand, the report noted.
“The expenditure side trends show robust demand supported by two factors. First, a broad deceleration in prices is reflected in contractionary trends in GDP deflators, and second, good performance in labour-intensive sectors such as agriculture, manufacturing, construction and services like personal and financial services. The growth in change in stock also suggests strong demand trends," the report said.