Indian GDP Growth Accelerates: The U.S. imposed tariff policies during Donald Trump’s presidency that have had a negative effect on global trade relations and caused disruption for many countries’ economies. Despite this, however, India still posted an impressive 8.2% increase in GDP for the second quarter of fiscal year 2025-26. The increase caught most analysts by surprise and exceeded all forecasts.
Domestic development has been a large contributor to Indian economic growth as well.
The major contributors to this growth are listed below:
1. Continued strong consumer spending (approx. $2.0 billion) was reported for both January and February; on March 4 at 7.9%. Private consumption, which represents a large portion of GDP.
2. Strong growth in industrial output; manufacturing grew approximately 9.1% year-on-year due to strong demand and significant Domestically Produced Capacity.
3. The greater construction sector, as well as the larger economy, is demonstrating growth. Along with private consumption and industry, construction is another significant contributor to the improved economy.
Despite the external pressures resulting from global tariff increases and declining foreign demand, strong internal fundamentals (domestic demand, strong consumer spending, and supportive government policy measures) have protected India from experiencing the unemployment fluctuations and losses in revenue that are being caused by these tariff actions.
What This Means in the Context of Trump’s Tariff War
Indian GDP Growth Accelerates: India is an Emerging Economy that is proving to be a Glaring Contrast to Other Countries with Higher Tariff Rates. All countries are being affected by the rising tariffs in the U.S.; however, the amount of impact will vary by Country. All Global Organisations, including the International Monetary Fund (IMF), had previously identified a Global economic slowdown in Emerging Markets due to the U.S. Tariffs.
India appears to be a shining light versus other emerging markets.
In the latest quarter (Q2), data shows that India’s overall Growth Rate may be less impacted by External Demand than other Countries and may also be more robust to External Trade Shocks. The Data further identifies a Substantial increase in Domestic Consumption, Manufacturing Independence from Imports, and an ability to produce internal Consumption Cycles that will enable to experience of continued Growth Track.
In addition, many Analysts and Economist Forecasted that the data released in Q2 would result in lower GDP rates and Growth Rates for the upcoming Fiscal Year (FY26) due to the Tariff induced Export weakness and also Global Trade Uncertainty, however, now that the Q2 data has been released various Agencies and Analysts have updated their previous Growth Rate Projections and now believe that the Robust Internal Demand and recent Fiscal Actions Will Contribute to Support Continued Higher Levels of Growth.
Risks remain for continued growth.
The Global Demand Picture is still Unknown, and therefore, the export-dependent industries Will Continue to be impacted by U.S. Tariffs; the Ongoing Geopolitical Conflict, the Volatility of Currency Rates, and the Ongoing Disruption to Global Trade will and can produce new Challenges for India’s Economy as well. Various Analysts Continue to indicate that Continued Support from Government Policies, Continued Infrastructure Investment, and Continued Macroeconomic Management Will be Necessary in Order to maintain India’s Current Growth.
