India's growth fairy is back with the breeze.

Real GDP grew by 8.2% in Q2, FY25 as against 5.6% a year ago, beating both the RBI and consensus estimates. For the first half of FY26, growth rate stood at a robust 8%.  

The economy remained resilient, thanks to rising private consumption, investments, and front-loading of production and exports ahead of steep US tariffs. Economists, however, warn that growth could slow in the second half of the fiscal year due to a high base effect, the impact of tariffs and because of the private investments slowdown amid global uncertainty.

The recent GST cuts laid a welcome mat for consumption during the festive season, but it may or may not open that life-altering window as the government is anticipating. So analysts have pared down Q3 and Q4 growth projections to 6.5% and 6.3%, respectively. In other words, the rest of the year may not be as zestful as in the first half. 

The IMF too has lowered the full fiscal FY26 growth projections to 6.6% in FY26, down from its July forecast of 6.4% citing high US tariffs. For FY27, it pegged growth at 6.2%. However, the RBI has retained its forecast and so has the government, which too stuck to its projections of 6.3%-6.8% in FY26. 

On its part, the government insists that it'll withstand trade-related uncertainties and maintain growth through the rest of fiscal riding on strong demand, steady public spending and easing inflation. Above all, it believes that led by a favourable impact of GST rate rationalisation,  the Indian economy was now on a stable footing.

But global uncertainties including shifting trade policies, geopolitical frictions, and financial market volatility pose potential headwinds to exports, capital flows, and investor sentiment. 

It means the Asian tiger's ambitious target of emerging as the world's third-largest economy may well be joined by love, but stands separated by distance. The IMF concluded as much on Thursday noting that the $5 trillion target will have to wait a few more years largely due to a weakening rupee.  

Consumption and investments are like the twin tusks of an elephant that aid growth, but both remain below potential. While private consumption led the happy way forward clocking a 7.9% growth in Q2, investments stood at 7.3%, lower than the 7.8% seen in Q1.  

As the IMF noted, private investments remain uneven and sluggish, while growth is being fueled by government investment, which has surged 40% so far this fiscal. That said, Q2 saw an unforeseen deceleration in government expenditure. Until now, public investment, strapping on the Superman cape, has been saving the day, but in Q2, it contracted by 2.7% as against a growth of 4.3% last year and a healthy 7.4% in Q1, FY26.  

According to the data released by the National Statistics Office on Friday, real Gross Value Added (GVA) grew by 8.1% in Q2, FY26 as against 5.8% a year ago, while in H1, FY26, it registered a growth of 7.9%

In absolute numbers, real GDP at constant prices is estimated at Rs 48.62 lakh crore during Q2, compared to Rs 44.94 lakh crore a year before, while for H1, FY26 it stood at Rs 96.52 lakh crore compared to Rs 89.35 lakh crore the previous year.

On the supply side, all three key components, namely agriculture, services and the industrial sector, heaved up national output in good measure. Importantly, manufacturing and services components saw substantial growth during the quarter under review. 

The primary sector grew by 3.1% in Q2, FY26, lower than the 3.5% registered during the same period last year. On a sequential basis though, it saw a marginal increase from 2.8% in Q1. Within this, agriculture, and allied sectors saw 3.5% growth as against 3.7% and 4.1% in Q1, FY26 and Q2FY25, respectively. On the other hand, mining and quarrying, however, saw a deceleration of 0.04% as against a negative growth of 0.4% a year before.

During H1, the agriculture and allied sector has bounced back with a 3.6% growth after sub-optimal growth rate of 2.7% last year. Helpfully, growth of manufacturing at 8.4% and the services sector at 9.3% boosted the overall output. However, mining and quarrying was the only sector that saw a de-growth of 1.8% as against 3.6% growth last year.

Secondary or industrial sector growth did one shade better than last year from 6.3% in H1, FY25 to 7.6% in H1, FY26 led by healthy growth from all the three sub-components namely manufacturing, electricity, and other utility services and construction. The biggest contribution came from manufacturing at 8.4% as against 4.8% last year, closely followed by construction at 7.4%. However, electricity, gas, and other utility services paled in comparison with a dismal growth of 2.4% compared to 6.5% a year before. 

The services sector retained the growth momentum at 9.3% in H1, FY26 as against 7%  during the same period last year. In particular, trade, hotels, transport, communication and services related to broadcasting recorded 8% growth followed by financial, real estate and professional services and public administration and others at 9.9% and 9.7% growth, respectively. 

On the expenditure side, private consumption, the largest component accounting for over 56% of the GDP, chucked some luck during Q2. It grew by 7.9% and 7.5% in Q2 and H1, FY26, respectively, higher than the 7% and 7.3% registered during the same period last year. Sequentially too, growth remained resilient.

The biggest setback came from government expenditure that saw a de-growth of 2.7% in Q2, though it registered 2.5% growth in H1, FY26.  

Private investments remained healthy at 7.3%, a shade lower than 7.8% in Q1 but higher than 6.7% seen a year before. For the first half of the fiscal, they grew by 7.6%.