Feb 27 (Reuters) – India’s economy grew 7.8% in October-December from the same period a year earlier, down from an 8.4% expansion in the previous quarter as growth in government spending and investment slowed, even as private consumption rose strongly.
For the full fiscal year ending in March, the government expects the South Asian economy to have grown by 7.6%, the National Statistics Office said as it unveiled a revised series of national output data. It had been forecast to grow by 7.4% under the old data series. At this pace, India remains the fastest-growing major economy globally.
COMMENTARY:
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE:
“At first glance, the momentum in the rebased growth numbers appears to be marginally stronger than the previous trend, with methodological changes expected to have captured updated production structures, wider coverage of segments, new ratios, and improved government data sets, including those that capture activity in the informal sector.
Service sector performance signals a strong lift, besides double-digit growth in manufacturing. The October-December quarter also benefited from indirect tax rationalisation and festive demand, in addition to a better faring rural farm sector. The rebased numbers are close to our forecast of 7.7% YoY for FY26.”
SUJAN HAJRA, CHIEF ECONOMIST & EXECUTIVE DIRECTOR, ANAND RATHI GROUP, MUMBAI:
“India’s GDP data for Q3 FY26 and the Second Advance Estimates for FY26 have both come in above 7.5%, marginally exceeding our expectations. Importantly, the headline GDP and GVA trajectories under the new series are not materially different from those under the old series, suggesting continuity in the underlying growth narrative rather than a statistical distortion.
That said, nominal GDP growth for the year continues to remain below 9%, implying that while real activity is robust, the nominal backdrop — crucial for revenue buoyancy and profit growth — is relatively contained.
These better-than-expected numbers have clear market implications. For equities, the improved growth impulse strengthens the outlook for corporate earnings, especially for cyclical and domestic-demand-oriented sectors. For the debt market, stronger real growth — even with moderate nominal expansion — improves the outlook for government finances by supporting tax collections and reducing fiscal slippage risks.”
ALEXANDRA HERMANN, LEAD ECONOMIST AT OXFORD ECONOMICS, UNITED KINGDOM:
“The GDP data exceeded both our and consensus expectations, although the methodological changes mean that like-for-like comparisons are not straightforward. The improved capture of faster-growing segments of the economy suggests that the measured growth trajectory is likely to be structurally higher under the new series.
With food price volatility set to play a smaller role for headline inflation and measured growth stronger following the methodological revisions to both inflation and the national account series, further rate cuts look highly unlikely. In fact, firm demand pushing up core inflation skews risks toward a rate hike before end-2026, in our view.”
VIKRANT CHATURVEDI, ASSOCIATE DIRECTOR – RESEARCH, BRICKWORK RATINGS, MUMBAI:
“India’s Q3 real GDP growth of 7.8% underscores the economy’s sustained resilience, driven by robust manufacturing and services activity.
From a fiscal perspective, nominal GDP growth of 8.9% in Q3 provides a more favourable denominator for fiscal deficit and debt-to-GDP ratios. While this statistical improvement offers greater fiscal space, the sustainability of India’s debt trajectory will hinge on continued revenue buoyancy and disciplined expenditure management.
Looking ahead, robust GDP growth must be harnessed to anchor fiscal consolidation, thereby reinforcing India’s macroeconomic stability and credibility in global capital markets.”
MADAN SABNAVIS, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
“GDP growth for FY26 comes in at 7.6%, which is similar to our forecast of 7.5%-7.6%. The new series is quite different from the earlier one insofar as gross fixed capital formation rate is higher at 31.7% of GDP, while share of consumption is lower at 56.7%.
We do expect growth of 7%-7.5% in FY27. Based on the nominal GDP growth rate, we don’t anticipate fiscal numbers to change significantly. The wedge between real and nominal GDP growth rates has come down to just 1% in FY26 and will widen to 3% in FY27.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA LTD, GURUGRAM:
“As per the dataset on the new 2022-23 series released by the NSO, India’s real GDP growth is estimated to have eased to 7.8% in Q3 FY2026 from 8.4% in Q2 FY2026, although both numbers are healthier than what we had expected.
ICRA projects the GDP growth at a healthy ~7% in FY2027, amid favourable developments including the interim deal with the U.S. with a lower tariff rate, improved prospects for domestic investment, aided by the robust hike in Central capital spending included in the Union Budget. The reduction in GST rates, cumulative 125 bps rate cuts, as well as lower-than-expected rise in food inflation, along with upbeat farm sector trends portend a favourable outlook for private consumption in the upcoming fiscal.
ICRA believes that there is a higher likelihood of a prolonged pause on the policy rate, amid expectations of a base-led uptick in the CPI inflation in the near term.”
GARIMA KAPOOR, DEPUTY HEAD OF RESEARCH & ECONOMIST, ELARA SECURITIES, MUMBAI:
“The Q3 FY27 GDP growth estimate at 7.8% came a tad below our estimate of 8%. The base revision and the new GDP series suggests that there is an upside bias to manufacturing growth vs the old series but overall there is not a significant diversion between the two. We continue to see FY27 growth at 7.1%-7.2%.”
(Reporting by Ashwin Manikandan in Mumbai and Nishit Navin, Komal Salecha, Bharath Rajeswaran, Kashish Tandon and Meenakshi Maidas in Bengaluru; compiled by Abinaya Vijayaraghavan; Editing by Sonia Cheema)
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