India’s economic momentum appears to be accelerating, with the country’s Q2 GDP growth of 7.5% or higher, according to a new report from the State Bank of India (SBI) Research. The bank attributes this stronger-than-expected performance to a surge in consumption triggered by the latest Goods & Services Tax (GST) rate rationalization, combined with rising investment activity, improved rural demand, and a buoyant services and manufacturing sector.
The Reserve Bank of India (RBI) had earlier forecasted Q2 GDP growth of 7.5%, but SBI Research now expects an upside surprise.
A Stronger Festive Season Pushes Growth Beyond Expectations Q2 GDP growth of 7.5%
According to the SBI report released on November 18, 2025, the GST rate cuts introduced earlier in the year played a decisive role in boosting festive season purchases across sectors. This GST rationalization helped unlock consumer sentiment, with the report describing the festive sales boost as “a triumph of hope over hype.”
The research highlighted that India’s economic upturn is supported by a combination of factors including rising investment activities, recovery in rural consumption, and strong performance in services and manufacturing.
Leading Indicators Show Broad-Based Acceleration
The report reveals that 83% of leading indicators across agriculture, industry, and services showed acceleration during Q2 FY26, compared with 70% in Q1. Sectors linked to consumption and demand showed notable strength, hinting at deeper structural recovery.
Based on SBI’s nowcasting model, the estimated Q2 GDP growth of 7.5% with room for an upside surprise, signaling a robust economic environment.
Risks Remain, but Outlook Stays Solid
Despite the positive momentum, the report warns of risks from volatile global commodity markets and potential fallout from international trade disruptions. However, India’s macroeconomic fundamentals—such as stable inflation, supportive fiscal policies, and strong domestic demand—are expected to sustain growth in the medium term.
GST Collections Set to Cross ₹2 Lakh Crore in November
SBI Research estimates that gross domestic GST collections for November 2025 (based on October returns) may reach ₹1.49 lakh crore, a year-on-year growth of 6.8%. Combined with IGST and import cess collections of approximately ₹51,000 crore, total GST revenues could cross the ₹2 lakh crore mark.
This surge is attributed to the festive season demand, GST rate rationalization, and increased compliance—reflecting stronger economic activity across states.
Consumption Patterns Reveal Key Shifts
The SBI report highlights significant trends in consumer behaviour based on debit and credit card spending:
Credit Card Insights
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Strong growth in Auto, Electronics, Furniture, Grocery, and Travel categories.
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E-commerce sales show 38% spending on utilities & services, 17% in supermarkets & grocery, and 9% via travel agents.
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Mid-tier cities are emerging as powerful spending hubs, showing higher growth rates than metros.
Debit Card Insights
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Growth visible across all major states during September–October 2025.
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In e-commerce spends:
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Metros grew by 8%,
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Urban by 7%, compared to the same period last year.
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This demonstrates broad-based consumption recovery rather than metro-centric growth.
GST Rationalization Boosting Savings
According to SBI Research, the reduction in effective GST rates is likely to boost household savings. Based on early estimates, consumers may save around 7% per month, and this could increase further as more data becomes available.
The textile sector remains the only major category not showing strong consumption elasticity post-GST changes.
Vehicle Sales Indicate Rural and Premium Growth
Vehicle sales data show encouraging signs as all regions recorded double-digit growth, averaging 19% in car sales.
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Rural regions led the growth, followed by urban areas.
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39% of cars sold were priced above ₹10 lakh, showing a shift towards premium purchases.
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Premium car sales above ₹20 lakh increased sharply across metro and urban markets.
This mix of rural momentum and urban premiumisation signals healthy underlying demand.
India’s stronger-than-expected Q2 GDP growth of 7.5% is being driven by improved consumer sentiment, GST rationalization, rising investments, and broad-based sectoral recovery. While global risks continue to pose challenges, the domestic economy appears well-positioned for sustained expansion in the coming quarters.
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