India’s Q2 growth seen at 7 percent: HSBC

New Delhi

India’s GDP is expected to grow 6.3% in the current financial year (FY26) despite global challenges, according to a new HSBC report released on Wednesday. The report predicts that growth in the April-June quarter (Q2) could be around 6.8-7%, mainly driven by strong consumption in the informal sector.

HSBC Global Investment Research tracks 100 indicators to understand economic trends. In April, 72% of these indicators showed positive growth, while in May, 67% did. Overall, Q2 has performed better than Q1, with 70% of indicators in positive territory so far. If this trend continues, GDP growth for Q2 may reach around 7%.

The informal sector has led the growth, supported by higher two-wheeler sales, non-durable goods production, non-cess GST collections, better rural trade terms, and rising real rural wages. In contrast, formal sector growth has been mixed. While petrol demand and durable goods production were strong, passenger vehicle sales were weaker.

Government spending has also played a key role, with capital expenditure rising 54% in April-May FY26 due to strong non-tax revenues and surplus from the RBI.

The report noted a clear shift from formal to informal consumption. Indirect tax collections, which indicate informal consumption, are now growing faster than direct taxes. Also, credit to MSMEs (small businesses) is increasing even as overall credit growth slows, and small firms are seeing higher salary growth than big companies.

HSBC expects two major trends this year: a shift from investment-led to consumption-led growth and within consumption, a move from formal to informal sectors. Lower inflation has helped increase people’s real purchasing power, boosting spending in informal markets.