India growth beats all estimates as factories defy Trump tariffs

1 3 minutes read

India’s economy grew at its fastest pace in six quarters, underscoring its resilience even as US President Donald Trump’s heavy tariffs hit the forecast.

GDP increased by 8.2%Gross domestic product in the three months through September compared with a year earlier, the Statistics Ministry said on Friday, beating all 38 estimates in a Bloomberg survey of economists and much faster than the average forecast of 7.4%. The economy expanded by 7.8% in the April-June quarter.

In a post on X, Prime Minister Narendra Modi described the GDP figure as “very encouraging”, saying it reflects the impact of the government’s “pro-growth policies and reforms”.

The yield on India’s five-year sovereign bond rose as much as 8 basis points to 6.24% on Friday, as markets viewed the strong data as dampening the chances of an interest rate cut at next week’s policy meeting.

Economists such as Sonal Varma of Nomura Holdings had earlier expected the RBI to cut interest rates on December 5, but now says this could be a “soon decision”. “India’s moderate macro mix — high growth and low inflation — is unique,” Varma said.

As a result of this strong data, full-year growth is now expected to be at least 7%, up from 7%He said in. Anantha Nageswaran, India’s chief economic adviser, told reporters in New Delhi that the inflation rate had earlier risen by 6.3% to 6.8%.

While the numbers will be a big boost for Modi, many economists do not expect the momentum to continue through the remaining quarters if uncertainty over the trade deal with the US persists. India, which faces 50% tariffs, is among the last major economies that have not yet signed a trade agreement with Washington.

A jump in manufacturing — which expanded at its fastest pace in more than a year — coupled with stronger financial services activity led to better-than-expected results last quarter. Analysts said the data also suggested that the economy benefited from the 100 basis point interest rate cuts introduced by the central bank earlier this year.

The data confirms that “India will remain the fastest growing economy in the world, and supportive fiscal and monetary policies appear to be contributing to the revival of long-awaited investment demand,” said Sumita Deveshwar, chief economist at GlobalData.TS Lombard.

Modi is trying to support growth by stimulating consumer and business spending. His government introduced major tax cuts in September, boosting demand ahead of the festival season. Private consumption, which represents nearly 60% of GDP, jumped 7.9% in the fourth quarter of last year. The manufacturing sector grew by 9.1%.

Government spending fell by 2.7% in order to stay on track to meet the budget deficit target, as tax cuts eroded revenues.

“The support this quarter came from pre-holiday stockpiling by producers,” said Sakshi Gupta, economist at HDFC Bank Limited. She said exporters also made shipments before Trump’s tariffs took effect in August, contributing to the support.

However, the momentum may fade in the coming quarters.

“What remains uncertain is whether the jump in demand seen during the holiday season will continue over the coming months, especially since urban employment trends remain tentative.” Gupta said.

Some economists also said the data may have been supported by statistical effects such as a lower deflator, which is used to exclude inflation from economic output. “Contrasts also contributed significantly to headline GDP growth this quarter,” Nomura’s Varma said.

The long stalemate over the US trade agreement is weighing heavily on the outlook. Data released earlier this month showed exports contracted nearly 12% in October from a year earlier, with shipments to the United States down 8.6%.

The International Monetary Fund has lowered its growth forecast for India in the next fiscal year to 6.2%.Assuming high US tariffs remain in place.

However, officials in New Delhi have repeatedly said in recent weeks that an agreement is close. Ahead of the GDP data on Friday, a senior official said India was optimistic that it would conclude a preliminary agreement with Washington by next month to reduce reciprocal tariffs.