{"id":75099,"date":"2025-11-26T11:36:39","date_gmt":"2025-11-26T06:06:39","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=75099"},"modified":"2025-11-26T11:42:26","modified_gmt":"2025-11-26T06:12:26","slug":"indias-q2-fy26-gdp-surpasses-rbi-forecast-driven-by-consumption-capex","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/indias-q2-fy26-gdp-surpasses-rbi-forecast-driven-by-consumption-capex\/","title":{"rendered":"India&#8217;s Q2 FY26 GDP Surpasses RBI Forecast, Driven by Consumption &#038; Capex"},"content":{"rendered":"<h2><b>India\u2019s Q2 GDP Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Economists expect India\u2019s Q2 FY26 GDP to surpass the RBI\u2019s 7% forecast, potentially reaching 7.3%, slightly below the previous quarter\u2019s 7.8% high.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Growth remains <\/span><b>robust<\/b><span style=\"font-weight: 400;\"> despite 50% US tariffs introduced in late August.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Broad-based rural recovery, supported by strong labour markets and good crop output, along with increased urban consumer durable spending following GST cuts, is driving the expansion. Q3 FY26 is also expected to benefit from the GST cuts.<\/span><\/li>\n<\/ul>\n<h2><b>Nominal GDP Growth Slows, Poses Risks to Budget Targets<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">April-June GDP data showed <\/span><b>nominal growth<\/b><span style=\"font-weight: 400;\"> at a three-quarter <\/span><b>low<\/b><span style=\"font-weight: 400;\"> of 8.8%, below the Finance Ministry\u2019s 10.1% Budget assumption.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Nominal growth<\/b><span style=\"font-weight: 400;\"> refers to the growth of an economic variable without adjusting for inflation.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In other words, it measures the increase in value at <\/span><b>current prices<\/b><span style=\"font-weight: 400;\">, so it includes the effects of rising prices (inflation) along with the actual increase in output or income.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Economists expect July-September and FY26 nominal growth could fall below 8%, potentially impacting tax collections and raising fiscal deficit and debt-to-GDP ratios, despite strong real growth of 7.8%.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Fiscal deficit<\/b><span style=\"font-weight: 400;\"> is the gap between the government\u2019s total expenditure and its total revenue (excluding borrowings) in a financial year.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Debt-to-GDP ratio<\/b><span style=\"font-weight: 400;\"> measures a country\u2019s total government debt relative to its GDP. It shows the government\u2019s ability to repay debt. A higher ratio means debt is growing faster than the economy, which can strain public finances.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Monitoring nominal GDP is crucial for fiscal planning.<\/span><\/li>\n<\/ul>\n<h2><b>GDP Growth Likely Lags GVA Due to Slower Tax Collections<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In Q2, GDP growth may trail GVA growth, projected at 7.5\u20138% versus 8% GVA growth.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>GDP<\/b><span style=\"font-weight: 400;\"> (Gross Domestic Product): It measures total value of goods and services produced within a country in a given period. It is calculated as GVA + net indirect taxes (indirect taxes minus subsidies).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>GVA (Gross Value Added)<\/b><span style=\"font-weight: 400;\"> \u2013 It measures total value of goods and services produced by all sectors, excluding net indirect taxes. It indicates actual production and sectoral performance.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\"><span style=\"font-weight: 400;\">GDP growth can differ from GVA growth if net indirect taxes rise or fall.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">GDP includes net indirect taxes (GST minus subsidies), which fell year-on-year after a 10% rise in Q1.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Slower growth in these taxes explains why GDP growth may be lower than GVA.<\/span><\/li>\n<\/ul>\n<h2><b>Q2 FY26 Sees Surge in Private Consumption\u00a0<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Private consumption likely rose by 8% in Q2 FY26, the highest since Q3FY25.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It was boosted by the late-September GST rate cuts, low retail inflation (1.7%), rural wage growth (~6%), personal income tax cuts, and a 7.8% rise in employee costs of listed companies.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Growth could have been higher if households had not delayed purchases ahead of the GST rollout. Q1FY26 consumption had risen to 7% from 6% in Q4FY25.<\/span><\/li>\n<\/ul>\n<h2><b>Q2 FY26 Sees Strong Corporate Profits Amid Low Inflation<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Q2 FY26 was the best quarter for companies in two years, with sales up 6% YoY and profits rising 13%, aided by low retail inflation (1.7%) and zero wholesale inflation.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Limited impact from US tariffs and subdued input costs boosted profitability, supporting value-added growth and likely contributing to GDP growth around 7% for FY26, above the RBI\u2019s 6.8% forecast.<\/span><\/li>\n<\/ul>\n<h2><b>Government Capex Surges, Private Investment Shows Early Signs of Revival<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In Q2 FY26, Central government capital expenditure rose 31% YoY to \u20b93.06 lakh crore, supporting overall investment.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Private sector interest also increased, accounting for 71% of fresh investments in H1 FY26 versus 61% last year.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Q1FY26 gross fixed capital formation grew 7.8%, down from 9.4% in the previous quarter but above 6.7% in Q1FY25.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/business\/indias-q2-gdp-growth-seen-above-rbis-7-forecast-but-data-may-contain-some-noise-10384847\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.livemint.com\/economy\/indias-q2-gdp-growth-set-to-hit-7-5-predicts-sbi-report-but-has-rbi-missed-the-best-window-for-a-rate-cut-11763454496014.html\" target=\"_blank\" rel=\"nofollow noopener\">LM<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>India&#8217;s Q2 FY26 GDP is expected to hit 7.3%, surpassing the RBI&#8217;s 7% projection, boosted by strong private consumption, rural recovery, and a surge in government capital expenditure.<\/p>\n","protected":false},"author":18,"featured_media":75134,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[3888,60,22,59],"class_list":{"0":"post-75099","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-indias-q2-gdp","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/75099","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=75099"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/75099\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/75134"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=75099"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=75099"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=75099"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}