New Delhi, Nov 17 (NationPress) The growth of India's GDP is anticipated to hit a solid 7 percent during the second quarter of the current financial year (Q2 FY26), a decrease from 7.8 percent recorded in the April-June timeframe (Q1 FY26), as per a report released on Monday.

Additionally, the gross value added (GVA) is projected to experience a slight decline to 7.1 percent from 7.6 percent, respectively.

According to ICRA's report, the slowdown in the services sector—expected to be 7.4 percent in Q2 FY26 compared to 9.3 percent in the previous quarter—and agriculture—forecasted at 3.5 percent down from 3.7 percent—will likely overshadow an upswing in the industrial sector, which is projected to reach a five-quarter high of 7.8 percent, up from 6.3 percent.

The report also forecasts that net indirect taxes (in nominal terms) will contract year-on-year (YoY) during the quarter under examination, following a 9.5 percent increase in Q1 FY26. This contraction is attributed to a decrease in indirect taxes from 11.3 percent in Q1 FY2026 to -5.2 percent, alongside a milder contraction in subsidies from -7.3 percent to -4.6 percent.

Consequently, the gap between GDP and GVA growth is anticipated to revert to a negative state at 10 bps in Q2 FY2026, following a positive rate of 18 bps in the prior quarter.

Aditi Nayar, Chief Economist and Head of Research and Outreach at ICRA, stated, “A lower YoY increase in Government expenditure is likely to hinder the pace of GDP and GVA growth in Q2 FY2026 compared to Q1 FY2026.”

“However, increased inventory stocking due to the early onset of the festive season, bolstered by GST rationalization-induced volume growth and preemptive exports to the US ahead of potential tariffs, are expected to enhance the manufacturing sector's performance, allowing industrial GVA growth to surpass that of the services sector after a gap of four quarters,” she elaborated.

On a broader scale, the growth rate of gross capital expenditure has moderated to 30.7 percent in Q2 FY2026 (compared to 10.3 percent in Q2 FY2025) from 52.0 percent in Q1 FY2026 (and -35.0 percent in Q1 FY2025).

Simultaneously, the report noted an increase in absolute terms of monthly average capital expenditure, rising to Rs. 1,019 billion in Q2 from Rs. 917 billion in Q1.

On average, the monthly capex has surged to Rs. 544 billion in Q2 FY2026 from Rs. 378 billion in Q1 FY2026, which is approximately half of the government's expenditure level, the report indicated.