This growth marks an increase from the previous quarter’s 7.8%, which benefited from a lower deflator—a metric that measures the impact of inflation on the value of total economic output.

A survey conducted by Reuters had forecast the gross domestic product for the July-September period to be at 7.3%.

During the September quarter, India’s nominal GDP, which is not adjusted for inflation or deflation, increased by 8.7%, slightly down from 8.8% in the previous quarter.

The noticeable uptick in GDP growth can be attributed to a surge in manufacturing, construction, and domestic consumption. The government reported that financial and real estate professional services maintained a robust growth rate of 10.2% during the July-September period.

The sharp improvement in GDP growth rate was on account of a pick up in manufacturing and construction activity and domestic consumption. Financial and real estate professional services have “sustained a substantial growth rate” of 10.2% in Jul-Sep, the government said in a release.

During the September quarter, domestic consumption was “held back” ahead of the planned cuts to the goods and services tax, Neelkanth Mishra, chief economist at Axis Bank, told CNBC’s “Inside India” before the release of the GDP data.

The 50% tariffs on Indian goods exported to the U.S. took effect in August. To cushion the impact, New Delhi announced sweeping GST tax reductions effective Sept. 22 to boost domestic consumption.

Demand picked up sharply in October, with record sales of autos and gold as the GST cuts and earlier reduction of the individual income tax rate lifted disposable incomes. Even so, India’s goods trade deficit hit a new high on weak exports and higher gold imports.

The International Monetary Fund, in a report on Wednesday, said India’s real GDP is projected to grow 6.6% in fiscal 2026 before moderating to 6.2% in fiscal 2027, assuming a prolonged delay in a U.S.-India trade deal.

It also forecasted India’s merchandise exports to fall 5.8% in fiscal year 2026 to $416 billion, while goods imports are expected to rise 2.4% to $746 billion.

“Despite external headwinds, growth is expected to remain robust, supported by favorable domestic conditions,” the IMF said in the release, with its data also suggesting that India will become a $5 trillion economy by fiscal year 2029.

— CNBC’s Amitoj Singh contributed to this report.