India’s latest GDP print has landed like a statement to the world: in Q2 of FY 2025‑26, real GDP surged 8.2% year‑on‑year, the strongest pace in six quarters and well above most market forecasts. Behind the headline is a clear story of factories running hotter, construction sites buzzing, and financial services riding a powerful wave of credit and digital adoption.
Latest Q2 GDP surge:
According to official data, India’s real GDP grew 8.2% in the July‑September quarter of FY26, compared with 5.6% in the same quarter a year ago and about 8% growth in the first half overall. Manufacturing GVA jumped around 9% in Q2, a sharp improvement from low single‑digit growth last year, while the broader secondary sector (including construction and utilities) expanded above 8%. Services stayed in the fast lane, with trade, hotels, transport, communication, and financial and real‑estate services all clocking robust growth as consumption, travel and digital payments kept accelerating.
Why manufacturing and finance matter?
The current upswing is not just a post‑pandemic bounce; it is rooted in a slow but steady rebalancing toward industry and formal services. Research shows manufacturing’s real contribution to GDP has risen meaningfully since the 1990s when measured correctly, even if the share looks flat at current prices. Over the past few years, schemes like production‑linked incentives, higher public capex and rising FDI have pushed investments into autos, electronics, chemicals and capital goods, which is now visible in the 9%‑plus manufacturing growth and healthy factory capacity use.
Finance, real estate and professional services have emerged as another growth engine, supported by booming digital transactions, deeper credit penetration, and stronger balance sheets in banks and NBFCs. UPI volumes keep hitting new highs, NBFCs and PSU banks are reporting double‑digit loan growth, and formalisation via GST and digital trails is steadily pulling more activity into the tax net. Together, these two pillars – manufacturing and finance‑led services – are giving India a growth mix that is more investment‑driven and less fragile than a pure consumption spike.
A brief history of India’s growth storyTo understand why this 8.2% number matters, it helps to zoom out. In the early decades after independence, India followed a heavily planned, state‑led industrialisation path; growth improved from the colonial‑era “Hindu rate” of about 1% to roughly 4% a year, but controls and licensing held back private enterprise. The 1991 liberalisation dismantled much of the licence raj, opened the economy to trade and capital flows, and set the stage for a services‑led boom in IT, telecom and finance that took India to 7%‑plus growth in the 2000s. After a slowdown in the 2010s and the Covid shock, the current phase is increasingly defined by infrastructure build‑out, supply‑side reforms and an attempt to make India a serious global manufacturing and services hub at the same time.
Outlook for 2026 and 2030Most credible forecasts see India remaining the world’s fastest‑growing major economy in the near term, though not at 8% every year. A leading rating agency projects real GDP growth around 6.5% in FY26, broadly similar to FY25, assuming benign oil prices, supportive rates and normal monsoons, while multilateral and private forecasters cluster in the 6–7% band for the next few years. On this trajectory, India’s economy – about 3.9–4 trillion dollars in 2024 – is expected to approach or cross 6 trillion dollars by around 2030, likely cementing its place as the world’s third‑largest economy behind the US and China.
Longer‑term possibilities: 2035 and 2040Long‑range projections are always imprecise, but the broad contours are becoming clearer. One macro‑econometric vision exercise for India suggests that under a baseline scenario, annual GDP growth could average roughly 7–8% up to the mid‑2030s, with somewhat slower but still solid growth after that as the economy matures. Another major bank estimates India’s real GDP growth could average around 6.7% between 2025 and 2040, comfortably outpacing China and most large peers, driven by demographics, urbanisation, rising savings and continued investment.
On such a path, India’s GDP in 2035 could be roughly 2–2.5 times its 2024 size in real terms, and by 2040 it could plausibly be three times larger, even under conservative assumptions, provided average growth holds in the mid‑6s. Per‑capita incomes would rise far more sharply than in the past, but the quality of that growth – more formal jobs, higher female labour participation, greener infrastructure, and stronger human capital – will decide whether this is remembered as a genuine economic transformation or just a phase of fast headline numbers.
