India delivered a pleasant surprise in its GDP growth story last week! Reuters had predicted India’s GDP to grow at 6.7 percent for the quarter ended June 2025. All 12 economists polled by the The Wall Street Journal had projected a slowdown to a median of 6.6 percent. But, boosted by the manufacturing, construction and service sectors the actual number turned to be 7.8 percent. Annualized manufacturing and services growth, adjusted for inflation were at 7.7% and 9.3%, respectively, with the construction sector expanding by 7.6%.
The government’s recently announced intent to simplify and slash the value added consumption tax (known in India as the GST) could spike the economy even further for the quarter ending December 2025, in my view. (See my caveat in the last paragraph below.)
Indeed, CNBC reports that “The surprise acceleration in India’s GDP growth in Q2 means that the economy is still on course to expand by a world-beating 7% this year, despite the upcoming hit from punitive U.S. tariffs,” according to Joe Maher, assistant economist at Capital Economics. And Reuters quotes Radhika R., senior economist at DBS Bank in Singapore, “A sharp upside surprise in growth numbers belied consensus expectations for a slowdown. This was a product of strong service sector output benefiting from low deflators, coupled with firm farm output, and a jump in revenue as well as capital government spending.”
To be clear, I do expect that India’s numbers from the September quarter will not be good for two reasons. First the cascading effect and related shock wave of high import duties imposed by the United States starting August 27. And second because manufacturers may delay shipping product now, waiting until the lower GST rates actually come in to effect for the domestic market.
Last updated: December 26th, 2025
