India's year-on-year (YoY) GDP growth unexpectedly rose to a six-quarter high of 8.2% in Q2 FY2026 from 7.8% in Q1 FY2026, in contrast with the expectation of a slowdown (ICRA P: +7.0%). The upside surprise was largely driven by the services sector (+9.2%), amid higher-than-anticipated prints for the public administration, defence and other services(PADOS; +9.7%; likely led by health, education, recreationandother personal services) and financial, real estate and professional services (FRP; +10.2%) segments, even as growth in the industrial and agricultural segments was in line with expectations. On the expenditure side, private final consumption expenditure (PFCE; 7.9%) was the only component that saw an acceleration in growth in Q2 vis-à-vis Q1; besides, all components grew at a slower pace than GDP, while discrepancies reported a turnaround compared to the year ago levels. Looking ahead, an adverse base, the potential negative impact of UStariffs and limited headroom for capital spending by the Government of India (GoI; vs. the FY2026 Budget Estimates) may dampen the pace of growth from the robust 8.0% seen in H1 FY2026. Nevertheless, the FY2026 real GDP expansion now appears set to print at ~7.4%.
