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India’s economy grew at a faster-than-expected annual rate of 8.2% in the quarter to September, partly due to the impact of 50% U.S. tariffs.
This growth accelerated from 7.8% in the previous quarter, when a lower deflator unexpectedly boosted real growth. The deflator measures how inflation affects the value of total product.
A Reuters survey of economists had predicted gross domestic product (GDP) growth would be 7.3% in the July-September period.
India’s nominal GDP (not taking into account inflation or deflation) grew by 8.8% in the previous quarter, compared to 8.7% in the September quarter.
The rapid improvement in GDP growth is due to a recovery in manufacturing, construction activity, and domestic consumption. Financial and real estate professional services “sustained strong growth” of 10.2% from July to September, the government said in a release.
Neelkanth Mishra, chief economist at Axis Bank, told CNBC’s “Inside India” ahead of the release of the GDP figures that domestic consumption was “subdued” in the September quarter ahead of plans to cut the goods and services tax.
The 50% tariff on Indian goods exported to the US went into effect in August. To cushion the impact, New Delhi announced a significant GST tax cut from September 22 to encourage domestic consumption.
Automobile and gold sales hit record numbers as demand surged in October as disposable income rose due to GST cuts and an early cut in personal income tax rates. Still, India’s trade deficit in goods hit a record high due to sluggish exports and increased gold imports.
India’s real GDP is expected to grow 6.6% in FY2026 and slow to 6.2% in FY2027, assuming a long-term postponement of the US-India trade deal, the International Monetary Fund said in a report on Wednesday.
It also predicted that India’s merchandise exports would decline by 5.8% to $416 billion in 2026, while merchandise imports would increase by 2.4% to $746 billion.
“Despite external headwinds, growth is expected to remain strong, supported by favorable domestic conditions,” the IMF said in a statement, adding that its data also suggests India will become a $5 trillion economy by fiscal 2029.
—CNBC’s Amitoj Singh contributed to this report.
