HOW TO KEEP GROWTH ON TRACK

The impressive GDP surge fuelled by consumption patterns may well endure, but inflation, US tariffs are worries

- M.G. ARUN and SONAL KHETARPAL

THE ASTONISHING 8.2 PER CENT GDP GROWTH IN THE SECOND QUARTER OF FY26 and a revival in consumption patterns have raised hopes of the economy speeding at a faster clip this fiscal than the 6.5 per cent seen in FY25. While this is good news, questions remain: can the uptick be sustained over the next few quarters? More importantly, will it provide the boost for investment in the private sector and, in turn, create more jobs?

GDP growth in the second quarter was 2.6 percent points higher, compared to the 5.6 per cent in Q2FY25 (it was 7.8 per cent in the first quarter of the current fiscal). “Consumption is reasonably strong at present,” Dharmakirti Joshi, chief economist, Crisil, told INDIA TODAY. “This year, we are seeing a story of consumption pickup, not so much that of a pickup in investment. Consumption was the last to come out of the pandemic slump."

According to him, the factors driving the second quarter GDP boost are a low base in the same quarter last year, lower inflation (way below the Reserve Bank of India’s tolerance range), and the income tax benefits that had kicked in from the Union Budget announcements this year.

According to him, the factors driving the second quarter GDP boost are a low base in the same quarter last year, lower inflation (way below the Reserve Bank of India's tolerance range), and the income tax benefits that had kicked in from the Union Budget announcements this year.

The festive season largely fell out of the purview of the latest GDP figures, and will get reflected only in the Q3 numbers. That will add some more heft to growth in the next quarter. However, tempering this growth will be two things.