India's GDP Growth Surges to 7.8% in Q3 FY26, Beats Estimates

Introduction to India's Economic Performance

India's economy demonstrated robust performance in the third quarter of the fiscal year 2025-26, with Gross Domestic Product (GDP) expanding by 7.8%. The data, released by the Ministry of Statistics and Programme Implementation (MoSPI) on February 27, 2026, surpassed analyst expectations, which had pegged growth closer to 7.4%. This strong showing comes amid the rollout of a new GDP series with a revised base year, highlighting the economy's resilience despite a slight moderation from the previous quarter's growth of 8.2%.

Overhaul of GDP Calculation: A New Base Year

The latest GDP figures are significant not just for their value but also for the methodology behind them. The government has shifted the base year for GDP calculation from 2011-12 to 2022-23. This rebasing exercise is crucial for accurately reflecting the structural changes in the economy over the past decade, including the increased contribution of the digital economy and the evolving services sector. A similar revision in 2015 had a notable impact on growth figures, and this update aims to provide a more current and precise picture of India's economic health.

The 'Double Deflation' Method

Alongside the base year change, MoSPI has adopted the 'double deflation' method for calculating real value added. This advanced technique separately adjusts the prices of inputs and outputs to provide a more accurate measure of economic activity, particularly in the manufacturing sector. Previously, a single deflator was used, which could sometimes distort the real contribution of a sector, especially when input and output prices moved differently. The shift to double deflation is expected to enhance the quality and accuracy of India's national accounts data.

Key Drivers of Q3 Growth

The manufacturing sector emerged as the primary engine of growth during the October-December 2025 period, expanding at a remarkable double-digit pace of over 13%. This surge underscores a strong industrial recovery. The secondary sector, which includes manufacturing, construction, and utilities, recorded robust growth, reinforcing its foundational role in the current economic expansion. On the demand side, private final consumption expenditure (PFCE) continued to be a strong pillar, indicating resilient household spending. The services sector, especially trade, transport, and hospitality, also posted healthy growth, pointing to sustained urban demand.

Sectoral Performance Snapshot

While manufacturing led the charge, performance across other sectors was mixed. Construction activity, for instance, saw a sharp slowdown, with growth moderating to 6.6% from 8.7% in the preceding quarter. The primary sector, which includes agriculture and mining, grew by 4.9% in FY25, a notable improvement from 2.6% in FY24. The tertiary or services sector expanded by 7.9% in FY25, up from 7.3% in the previous fiscal year. This broad-based, albeit uneven, growth highlights the complex dynamics currently shaping the Indian economy.

Revised Annual Projections

Buoyed by the strong Q3 performance, the government has revised its GDP growth forecast for the full fiscal year 2025-26 upwards. The economy is now expected to grow at 7.6%, an increase from the first advance estimate of 7.4% released in January 2026. This revised figure aligns with the consensus of several economists surveyed by news agencies like Bloomberg. The nominal GDP for FY26 is projected to grow at 8.6%, reaching an estimated level of ₹345.47 lakh crore.

Beating Market Expectations

The 7.8% growth figure comfortably exceeded the median estimates of most economic polls. An ET poll had projected growth at 7.4%, while a Bloomberg survey of 34 economists had arrived at a median forecast of 7.6%. Some institutions like Union Bank of India and SBI Research were more optimistic, with projections of 8.3% and 8.1% respectively, but the official number still reflects a stronger-than-anticipated economic momentum. This positive surprise suggests that domestic demand and industrial activity held up better than expected against global headwinds.

Economic Implications and Outlook

The sustained high growth rate reinforces India's position as one of the world's fastest-growing major economies. The strong domestic demand and robust manufacturing performance provide a solid cushion against global economic uncertainties and trade disruptions. The updated GDP framework is expected to give policymakers, including the Reserve Bank of India, a clearer lens through which to view the economy, potentially influencing future monetary policy decisions. The RBI is expected to incorporate the revised framework in its next set of projections.

Conclusion

India's 7.8% GDP growth in Q3 FY26 is a testament to its economic resilience and strong domestic fundamentals. The introduction of a new GDP series with an updated base year and a more refined calculation method marks a significant step towards improving data accuracy. With manufacturing leading a broad-based expansion and the full-year growth forecast revised upwards to 7.6%, the economic outlook remains positive. The focus now shifts to sustaining this momentum through continued policy support and structural reforms.