India accelerates despite U.S. tariffs: growth at 8.2% and consumption rebounds

India’s GDP surprises analysts with a strong quarter, driven by manufacturing, construction, and a surge in consumption following GST cuts.

In an international environment marked by trade tensions and punitive tariffs, the Indian economy is stepping on the gas. In the July–September quarter - partially affected by the foreign policy of the Tycoon - the country’s real GDP grew by 8.2% year on year, far exceeding economists’ expectations, which according to a Reuters survey were at 7.3%.

The main contributors to GDP growth were manufacturing and construction, which benefited from rising domestic demand and improved operating conditions. Financial and real-estate services also maintained a brisk pace, posting a solid +10.2% in the period.

Domestic demand, initially held back by anticipation of goods and services tax cuts, regained momentum in the autumn. On 22 September, the Indian government introduced a broad reduction in GST to offset the effects of U.S. tariffs and stimulate consumption. The effect was immediate: October recorded record sales of automobiles and gold, helped by the earlier reduction in income tax that boosted households’ purchasing power.

Despite the strengthening of domestic demand, the external picture remains more uncertain. Weak exports and a surge in gold imports pushed the trade deficit to new highs. The International Monetary Fund itself expects growth to slow in the coming years: +6.6% in 2026 and +6.2% in 2027, partly due to the potential continuation of trade tensions with the United States.

Yet, according to the IMF, long-term prospects remain solid. The combination of robust domestic demand, fiscal reforms, and productive dynamism could allow India to reach the $5 trillion mark by 2029, consolidating its role as a key player in the global economy.

Andrea Pelucchi