India’s economic outlook remains upbeat, with SBI projecting 7.5% GDP growth for Q2 FY26, driven by strong investment activity, improving rural consumption, and the positive impact of recent GST rationalisation. According to SBI’s latest Ecowrap report, internal modelling and high-frequency indicators point to broad-based economic momentum that may even surprise on the upside.
Economic Acceleration Across Secto
SBI said that nearly 83% of its leading indicators showed expansion during Q2 FY26, compared with 70% in Q1, as reported by ANI.
The bank noted that India’s recovery is now well-balanced, spanning agriculture, industry, and services, rather than being driven solely by urban demand.
A revival in rural consumption helped by improved kharif arrivals and rising rural incomes has added depth to the current consumption cycle.
Investment Activity Strengthens Further
Investment-led growth continues to define India’s current expansion phase.
SBI highlighted:
- Higher government capital expenditure
- A rise in private sector project announcements
- A pick-up in construction and infrastructure development
The ongoing push in roads, railways, logistics corridors, and energy-transition projects is expected to keep investment activity elevated through FY26 as well.
GST Rationalisation Fuels Festive Consumption Boost
One of the standout factors in SBI’s analysis is the September 2025 GST rationalisation, which cut rates across several consumption categories.
This coincided with the festive season, amplifying demand significantly.
Festive Spending Surge
The SBI report shows strong jumps in spending during September–October 2025, especially in:
- Automobiles
- Groceries and essentials
- Electronics and appliances
- Furniture
- Travel and hospitality
Higher credit and debit card transactions reflect both rising consumer confidence and deeper adoption of digital payments.
Mid-Tier Cities Lead Demand Surge
Mid-sized cities saw the fastest growth, powered largely by e-commerce platforms.
This signals a shift in India’s consumption landscape, with non-metro markets emerging as robust growth engines.
GST Revenues Expected to Cross ₹2 Lakh Crore
For November 2025 (based on returns filed in October), SBI projects gross GST collections at ₹1.49 lakh crore, up 6.8% YoY.
Adding:
- IGST settlement: ₹51,000 crore
- Cess on imported goods
Total GST inflows are expected to surpass ₹2 lakh crore.
Lower Rates, Higher Compliance
SBI attributes the buoyant revenue trend to:
- Rationalised GST slabs boosting formal consumption
- Simplified tax structure improving compliance
- Strong transactional volumes during the festive quarter
Most states are expected to report positive revenue gains, strengthening sub-national fiscal positions.
Manufacturing and Services Continue to Outperform
According to SBI’s nowcast model:
Manufacturing Momentum Holds
Strong order books and higher capacity utilisation in:
- Automobiles
- Electronics
- Engineering goods
- FMCG
helped sustain industrial momentum.
Services Remain Robust
Key service sectors showed month-on-month gains:
- Financial services
- IT and digital services
- Travel and tourism
- Retail and logistics
Consistent e-commerce shipments and increased air travel further lifted the services outlook.
Rural Demand Shows Early Signs of Revival
SBI emphasised improving rural sentiment, reflected in:
- Higher tractor and two-wheeler sales
- Better mandi arrivals
- Improved liquidity conditions
- Strong microfinance disbursements
A sustained rural revival could add another layer of resilience to India’s growth trajectory in H2 FY26.
Upside Risk: GDP Could Beat 7.5%
SBI’s model indicates a Q2 FY26 nowcast of around 7.5%, with room for an upside surprise.
Growth may surpass expectations due to:
- Strong public capex
- Rising private investment intent
- GST-driven consumption stimulus
- Better farm-sector sentiment
- Continued formalisation of the economy
Finally,
SBI’s latest assessment reinforces the view that India will remain one of the fastest-growing major economies globally. With structural reforms, healthy domestic demand, rising investments, and a festive-season boost, Q2 FY26 GDP is likely to be robust. If GST rationalisation continues to support consumption and rural momentum strengthens further, India appears firmly on course for 7%+ growth in FY26, cementing its position as a key global growth engine.
