India’s economy delivered a major upside surprise last quarter, expanding 8.2% despite an escalating tariff battle with the United States. The figure marks the strongest growth in a year and a half and comfortably beats economists’ expectations of 7–7.3%.
The resilience comes even as Washington’s sharp tariff hikes—raising duties on several Indian exports to as high as 50% in August—had stoked concerns of a substantial blow to India’s manufacturing sector. Instead, companies ramped up production and accelerated shipments ahead of the tariff deadlines, cushioning the immediate impact of the trade restrictions. Strong domestic demand further amplified the momentum.
While policymakers have welcomed the results, analysts caution that the growth spurt may prove difficult to maintain as the full brunt of the US duties is yet to be felt. India is still negotiating an initial tariff-reduction agreement with Washington, which Bloomberg reports could be concluded as early as next month.
Tariff Impact Still Unfolding
Economists say the front-loading of exports provided a temporary lift that may not persist.
“Once the pre-deadline rush fades, the tariff effect will become clearer,” said Sakshi Gupta of HDFC Bank, adding that it is uncertain whether the festive-season boost in spending will extend into the coming months, especially with fragile urban job creation.
The first signs of stress are already visible: exports in October slipped nearly 12% year-on-year, including an 8.6% drop in shipments to the US. The IMF expects India’s growth to moderate to 6.2% next year if tariff pressures remain elevated.
Manufacturing Leads the Charge
Manufacturing output surged 9.1%—the fastest pace in more than a year—driven largely by companies rushing goods out of factories before duties increased. Economists likened the tariff announcement to a “starter’s pistol,” triggering an intense burst of production.
Garima Kapoor of Elara Capital described the manufacturing performance as “blockbuster,” attributing much of it to export front-loading.
Domestic Demand Remains a Pillar
India’s vast consumer market again proved a stabilising force. Tax reductions on everyday products in late September spurred festival-season buying, helping private consumption grow nearly 8%. Households ramped up purchases across groceries, travel and discretionary goods, while producers raised inventories ahead of peak demand.
Services activity was also robust. Financial, real estate and professional services expanded about 10%, and sectors such as hospitality and transport saw renewed momentum. Earlier interest-rate cuts from the Reserve Bank of India helped support credit demand.
Sujan Hajra of Anand Rathi said the data indicates “broad-based” economic strength across sectors.
Questions Over Data Quality
Some economists, however, warned that statistical discrepancies may have inflated the headline figure.
Kunal Kundu of Societe Generale pointed to a “disconnect” between GDP numbers and earlier economic indicators. The IMF recently assigned India’s national accounts a “C” rating, citing methodological flaws including the reliance on an outdated 2011-12 base year.
Government Reaction and Outlook
Prime Minister Narendra Modi applauded the numbers as “very encouraging,” crediting government reforms for the momentum. Chief Economic Advisor V. Anantha Nageswaran revised the full-year growth projection to 7%, up from 6.3–6.8%.
Several analysts agree that structural reforms—ranging from digitisation to infrastructure expansion—may be bolstering the economy’s underlying resilience. Gurmeet Chadha of Complete Circle Capital said these improvements have strengthened India’s ability to absorb external shocks.
Ultra-Low Inflation Raises Rate-Cut Debate
The growth surge coincided with exceptionally subdued price pressures. Consumer inflation in October dropped to just 0.25%, a rare low that has reopened debate on whether the RBI should cut interest rates in December.
Hajra believes the inflation backdrop offers room for a 25-basis-point cut. But others say monetary easing may be unnecessary. With GDP now running above 8%, “the probability of a rate cut has certainly diminished,” said ICRA economist Aditi Nayar.
Can the Momentum Last?
While the latest figures underscore India’s role as the world’s fastest-growing major economy, much depends on how trade tensions with the US evolve. Economists expect some spillover of this quarter’s strengths into the next, but warn that sustaining growth above 8% will be challenging as export headwinds intensify.
For now, India’s domestic market, structural reforms and temporary manufacturing push have provided a powerful buffer—but the coming quarters may reveal how durable that strength truly is.
