New Delhi
India’s economy posted stronger-than-expected growth in the second quarter of FY26, driven mainly by higher consumer spending and steady investment activity. A new report shows that recent income tax cuts, GST rationalisation, an early festive season, and easing inflation helped private consumption expand by 7.9 per cent, giving the economy a noticeable lift.
Gross fixed capital formation also performed well, rising 7.3 per cent in the quarter. Analysts say this was supported by the government’s continued focus on public capital spending, which helped maintain investment momentum even as some sectors saw mild moderation. According to CareEdge Ratings, growth is expected to cool slightly later in the year, averaging around 7 per cent in the second half of FY26 after touching nearly 8 per cent in the first half. The agency now pegs overall FY26 GDP growth at 7.5 per cent. A low base from last year and a softer deflator also played a role in boosting headline growth.
Globally, easing price pressures have given many advanced and emerging economies room to cut interest rates. While Japan and Brazil raised rates to manage local inflation, countries like the US and UK opted for cuts to support growth despite lingering price concerns. The Dollar Index weakened during this period due to uncertainties surrounding US trade policies, rising fiscal worries, and increasing expectations of Federal Reserve rate cuts. Growing demand for gold by central banks also added pressure on the dollar, helping several major currencies strengthen.
India’s central bank adopted a dovish tone as it reduced inflation forecasts for FY26 and the first half of FY27, while raising its GDP outlook to 7.3 per cent. Another recent report suggested that emerging markets will account for nearly two-thirds of global economic growth in 2026, far outpacing advanced economies.
