India’s economy expanded faster than expected in the quarter ending September, posting an impressive 8.2% annual GDP growth, even as the country navigated new 50% U.S. tariffs on Indian exports during part of the period.

The latest figure marks a clear acceleration from 7.8% growth in the previous quarter, where a lower deflator unexpectedly boosted real GDP. A deflator measures the impact of inflation or deflation on overall economic output.

A Reuters poll had forecast growth at 7.3%, making the official reading significantly stronger than analysts anticipated.

Nominal GDP and Sector Performance

India’s nominal GDP — which does not adjust for inflation — rose 8.7% in the September quarter, nearly unchanged from 8.8% in the previous three months.

The government attributed the stronger real GDP performance to:

• A sharp rise in manufacturing output
• Continued expansion in construction activity
• Resilient domestic consumption
• Strong growth in financial, real estate, and professional services, which collectively grew 10.2% during the July–September period

These sectors served as the backbone of India’s economic momentum despite external trade pressures.

Impact of U.S. Tariffs and Domestic Policy Response

The 50% U.S. tariffs on select Indian goods, which came into effect in August, posed a clear risk to India’s export performance.

Ahead of this, domestic consumption was reportedly “held back,” according to Neelkanth Mishra, chief economist at Axis Bank. He noted on CNBC’s Inside India that households delayed spending in anticipation of upcoming tax reductions.

To counter the potential drag from tariffs and stimulate demand, the Indian government implemented sweeping Goods and Services Tax (GST) cuts effective September 22.

October Demand Surge but Trade Deficit Widens

Consumer demand rebounded sharply in October following:

• Lower GST rates
• Earlier reductions in individual income tax
• Rising disposable income levels

This led to record sales of automobiles and gold. However, the rebound came with a downside: India’s goods trade deficit widened to a new high, driven by:

• Weaker goods exports
• Increased gold imports

IMF Outlook: Strong Growth but Trade Pressure Ahead

In its latest assessment, the International Monetary Fund (IMF) projected that:

• India’s real GDP will grow 6.6% in FY2026
• Growth will moderate to 6.2% in FY2027, assuming prolonged delays in a U.S.–India trade agreement

The IMF expects merchandise export challenges to persist:

• Exports are projected to fall 5.8% in FY2026 to $416 billion
• Goods imports are expected to rise 2.4% to $746 billion

Despite these headwinds, the IMF emphasized that India’s growth trajectory remains positive, supported by strong domestic fundamentals, policy measures, and sustained investment.

The organization also forecasts that India will become a $5 trillion economy by FY2029, marking a significant milestone in the country’s long-term economic expansion.