Which sectors powered the expansion?
The rebound is industry-led and consumption-backed. In Q2, tertiary activities (services) grew by 9.2%, while the secondary sector expanded by 8.1%. Agriculture remained moderate with a 3.1% year-on-year GVA rise. Manufacturing was a standout contributor: September IIP rose 4.0% year-on-year, led by electrical equipment (up 28.7%), basic metals (12.3%) and motor vehicles (14.6%). Demand for infrastructure & construction goods (+10.5%) and consumer durables (+10.2%) also boosted production.
Inflation eases – real incomes improve
Price pressures have moderated. Consumer Price Index (CPI) inflation eased to 0.25% year-on-year in October 2025 the lowest since the current CPI series began driven largely by a sharp fall in food inflation (CFPI at –5.02%). Wholesale inflation (WPI) likewise turned negative at–1.21%. Lower food and commodity costs have supported real consumption and given the Reserve Bank of India room to maintain a neutral stance on policy rates.
Jobs and participation on the rise
Labour-market data show healthier engagement. The Labour Force Participation Rate climbed to 55.4% in October 2025, a six-month high, while the worker population ratio edged up and female participation rose to 34.2%. EPFO payroll additions remain strong net new members continue to flow, underscoring improving formal employment trends. The Naukri JobSpeak Index reported a 10.1% year-on-year increase in hiring interest, with AI/ML roles surging by 61%.
Trade helps anchor the external position
India’s external sector stayed resilient in April–October 2025. Cumulative merchandise and services exports rose 4.84%.to about USD 491.8 billion, with services exports jumping nearly 9.75%. Merchandise categories from electronic goods to marine products performed well, underpinning the export uptick and helping cushion external demand shocks.
Policy levers: reforms and incentives
Government programs notably the Production Linked Incentive (PLI) schemes across strategic sectors have supported manufacturing investment and export competitiveness. The new GST rate rationalisation and other trade-support measures, including a credit guarantee for exporters, have eased costs and reinforced supply chains. These policy moves, combined with ongoing skill and startup initiatives, are strengthening the economy’s productive base.
Risks and the road ahead
While the data are encouraging, risks remain: a sharper-than-expected global slowdown, commodity-price shocks, or localized weather-related agricultural weakness could dent near-term momentum. Policymakers must balance sustaining growth with vigilance on fiscal and financial stability. Still, with inflation benign and industrial activity broadening, India is positioned to sustain healthy growth in the near term.
Bottom line
The Q2 surge an 8.2% GDP print is not the result of a single factor but the cumulative effect of stronger manufacturing, resilient services, moderating inflation and rising labour participation. With targeted policy support and continued private investment, India’s growth story looks robust as it charts the path toward higher output and jobs.
