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India's economy expanded 7.8% in the October-December quarter under a revised GDP series, easing from the previous quarter but retaining its position as the fastest-growing major economy. Strong private consumption supported growth even as government spending and investment moderated. The National Statistics Office has raised full-year growth estimates to 7.6% for 2025-26. Projections for 2026-27 are placed between 7% and 7.4%. The government has also revamped national accounts methodology, broadening data sources and addressing earlier concerns raised by the International Monetary Fund over statistical practices.
India's economic growth moderated in the October-December quarter, but the country continued to lead major global economies in expansion. Data released in the past week showed that gross domestic product grew 7.8% year-on-year in the third quarter under a newly revised data series, compared with 8.4% in the preceding quarter. Advertisement
The revised estimates, issued by the National Statistics Office, slightly improved the growth outlook for the financial year ending March 31. The economy is now projected to expand 7.6% in 2025-26, compared with the earlier 7.4% estimate under the previous data framework.
For 2026-27, growth is expected to be in the range of 7% to 7.4% under the new GDP series, according to Chief Economic Adviser V Anantha Nageswaran. In his annual report released last month, growth had been projected at 6.8% to 7.2% for that year. He also indicated that India is set to cross the USD 4 trillion economic mark in the next financial year.
During much of the current financial year, exports faced pressure due to tariff-related uncertainty. In response, the government accelerated domestic reforms, including rationalising consumer taxes on hundreds of goods and advancing labour law changes that had been pending for years.
New Delhi also reached an interim understanding with Washington earlier this month to reduce effective tariffs to 18%, easing trade friction, although the agreement is yet to be formally signed. Meanwhile, US President Donald Trump announced a temporary 10% duty on all countries, including India, with a plan to increase it to 15%.
A recent order by the US Supreme Court striking down global tariffs imposed earlier is expected to support India's position in upcoming interim negotiations.
Private consumption remained a key growth driver, rising 8.7% year-on-year in the October-December quarter, up from 8% in the previous quarter. This strength helped offset moderation in other areas.
Government expenditure increased 4.7% during the quarter, compared with 6.6% growth earlier. Private investment expanded 7.8%, slightly lower than the 8.4% recorded in the previous period.
Manufacturing posted strong growth of 13.3%, marginally higher than the earlier quarter's 13.2%. Financial services and hospitality sectors also performed steadily. However, farm output growth slowed to 1.4% from 2.3% in the previous quarter. Agriculture continues to employ over 40% of India's workforce, making this sector crucial for rural income and consumption trends.
Radhika Rao of DBS Bank observed that service sector performance showed a strong lift alongside double-digit manufacturing growth. She noted that the quarter also benefited from indirect tax rationalisation and festive demand, along with relatively better rural conditions.
With growth remaining firm, rating agency ICRA indicated that the central bank may keep policy rates unchanged even if inflation sees a temporary rise. The Reserve Bank of India kept its key repo rate steady earlier this month.
This year, India undertook a major revision of its statistical framework. After updating the consumer price index, authorities revised the GDP series to better capture structural shifts in the economy.
The government expanded data inputs to include Goods and Services Tax filings, corporate financial statements and digital platform data. The revised methodology places greater emphasis on granular price deflation instead of relying mainly on wholesale price indices, which previously played a dominant role in calculations.
The changes aim to address concerns raised last year by the International Monetary Fund regarding India's national accounts system. The IMF had pointed to the outdated 2011-12 base year and heavy reliance on wholesale prices, assigning the framework a C rating at the time.
Source Reuters
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