New Delhi

India’s economy is expected to post strong growth in the second quarter of the current financial year, with GDP likely to expand by 7.5 per cent, according to an assessment by Union Bank of India. This would mark a sharp improvement from the 5.6 per cent growth recorded in the same quarter last year. The official figures for Q2 FY26 will be released on November 28.

The report noted that Q2 GDP growth is estimated at 7.5 per cent, lower than the 7.8 per cent recorded in Q1 but significantly higher than the previous year’s performance. Gross Value Added is also projected to rise to 7.3 per cent, compared with 5.8 per cent in Q2 FY25, although it remains slightly below the 7.6 per cent reported in the preceding quarter.

Nominal GDP growth is expected to ease to 8 per cent in the July to September period, down from 8.8 per cent in Q1 and slightly lower than the 8.3 per cent recorded a year ago. The bank said that a supportive base effect and a subdued GDP deflator, which lifted Q1 numbers, continued to influence the latest quarter.

According to the report, the impact of the fifty per cent tariff imposed by the United States was limited in Q2 because many exporters had shipped goods early. Strong government expenditure also helped sustain growth.

Private sector momentum remains solid, with GVA excluding agriculture and public administration expected to increase by 8 per cent, similar to the pace seen in Q1. The bank said this measure offers a clearer picture of underlying economic activity.

However, the report cautioned that growth could soften in the second half of FY26 as the favourable base effect wanes and inflation measured through both WPI and CPI potentially rises in the fourth quarter. Delays in finalising the US India trade agreement and the lagged effect of early export dispatches may also weigh on performance.

Looking ahead, Union Bank said the recent GST rate cuts should support demand and strengthen Q3 FY26 growth, although the pending trade deal with the United States could still create some drag. India’s direct export dependence on the US remains modest at about 2 per cent of GDP and even lower when excluding exempt items.

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The bank has revised its full year FY26 GDP growth projection upward to 7.1 per cent. It expects real GDP to rise, although nominal GDP may grow more slowly because of lower inflation.