India's real GDP growth for the second quarter of FY26 (July-September 2025) is expected to reach 7.5% or higher, driven by a powerful consumption boost following the GST rate cut, according to the State Bank of India (SBI) Research Department's latest report released on Tuesday, November 18, 2025.
This outlook is significantly higher than the Reserve Bank of India's (RBI) earlier projection, which had pegged Q2 GDP growth at 7%.
Consumption Boom After GST Rationalization Drives Growth
SBI Research noted that India's economic momentum is being supported by:
- A pickup in investment activity
- Revival in rural consumption
- Strong performance in services and manufacturing
- Positive impact from structural reforms, especially GST rationalization
The report highlighted that the GST rate cut helped revive festive sentiment across the country, calling it a "triumph of hope over hype."
According to SBI, 83% of leading indicators across agriculture, industry and services showed acceleration in Q2, up from 70% in Q1-signaling broad-based demand recovery. Its model-based nowcast indicates real GDP growth of 7.5% for Q2 FY26, with room for a potential upside surprise.
Risks Remain, But Near-Term Outlook Strong
SBI cautioned that global commodity price volatility and trade disruptions could pose risks. However, it emphasized that India's macroeconomic stability remains robust, giving the economy room for sustained medium-term expansion.
GST Collections Expected to Cross Rs 2 Lakh Crore for November 2025
SBI Research estimates gross domestic GST collections for November 2025 (based on October returns) at around Rs 1.49 lakh crore, marking a 6.8% YoY growth. Along with Rs 51,000 crore of IGST and import cess, total GST revenues could exceed Rs 2 lakh crore, supported by:
- Festive season demand
- Lower GST rates
- Higher compliance levels
- Strong state-level performance
Festive Season Sees Surge in Consumer Spending
The September-October 2025 festive months saw a significant consumption uplift due to GST rationalization. A detailed analysis of credit and debit card spending patterns revealed:
Credit Card Spending Trends
- Strong growth in merchant categories such as auto, electronics, grocery, furnishings, and travel
- In e-commerce:
- 38% of spends were on utilities & services
- 17% on supermarkets & groceries
- 9% on travel bookings
Mid-tier cities showed the strongest growth, indicating broader consumption revival beyond metros.
Debit Card Spending Trends
Debit card usage increased across all major states.Within e-commerce spending:
- Metros saw the highest growth at 8%
- Urban areas followed at 7% YoY
GST Cuts Leading to Higher Consumer Savings
SBI's analysis of consumption elasticity shows that all major sectors except textiles are highly responsive to GST reductions. This suggests that the rationalized GST structure has meaningfully stimulated demand.
The report also estimates that consumers may save up to 7% per month on average due to GST rate reductions-potentially increasing further as more data becomes available.
Vehicle Sales Soar; Premiumisation Gains Momentum
India's auto sector recorded a robust festive season:
- All regions saw double-digit car sales growth, averaging 19%
- Rural regions led the surge, followed by urban markets
- 39% of cars sold were priced above Rs 10 lakh, showing aspirational shift
- Metro and urban centers recorded rising premiumisation, with strong demand for models above Rs 20 lakh
Conclusion
The combination of GST rate cuts, rising festive consumption, improving rural demand, and strong investment activity has helped push India's economic growth trajectory upward. With Q2 FY26 GDP expected to exceed 7.5%, India's near-term economic outlook remains resilient-despite global uncertainties.
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