India's GDP Surges 7.8% in Q3 FY26 After Major Data Overhaul

A New Baseline for Growth

India's economy expanded at a faster-than-anticipated rate of 7.8% in the third quarter of the 2025-26 financial year, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on February 27, 2026. This strong performance, which places real GDP at ₹84.54 lakh crore for the October-December period, is underpinned by a significant overhaul in the country's method of calculating national output. The government has shifted the base year for GDP calculation to 2022-23 from the previous 2011-12, a move designed to better capture the structural changes in the economy.

Overhauling the Calculation Framework

The revised framework incorporates more contemporary data sources, including records from the Goods and Services Tax (GST) network and the Ministry of Road Transport and Highways' e-Vahan portal. Furthermore, the MoSPI has adopted the 'double deflation' method, a more precise technique for measuring value-added components of the economy. This comprehensive update aims to provide a more accurate reflection of economic activity. The Ministry has announced that a complete back series of GDP data based on the new methodology will be published by December 2026, which will be crucial for historical analysis and trend comparison.

Sectoral Performance and Key Drivers

The impressive Q3 growth was largely propelled by the manufacturing and services sectors. The manufacturing sector recorded a remarkable expansion of 13.3%, signaling strong industrial activity. The tertiary sector, which encompasses services, grew by a healthy 9.5%. Another key indicator of economic health, private consumption, registered a significant 8.7% increase, pointing to resilient domestic demand. Nominal GDP, which includes inflation, saw an 8.9% rise during the same period.

A Pattern of Outperformance

The Q3 figures continue a trend of the Indian economy exceeding expectations. In the second quarter of FY26 (July-September 2025), GDP had grown by 8.2%, surprising analysts and surpassing the Reserve Bank of India's projection of 7%. That surge was powered by a 9.1% rise in manufacturing and a 9.2% expansion in the services sector. The combined performance of the first three quarters solidifies India's position as the world's fastest-growing major economy, especially when compared to peers like China (4.8% growth) and Malaysia (5.2% growth) in the same period.

Full-Year Outlook and Global Standing

Looking ahead, the government's second advance estimate pegs the real GDP growth for the full financial year 2025-26 at 7.6%. This optimistic outlook is shared by external agencies as well. Fitch Ratings, for instance, recently upgraded its FY26 growth forecast for India to 7.4%, citing strong investment prospects and supportive policies. The rating agency expects growth to moderate gradually to around 6.2% by FY28 but maintains that India will remain among the fastest-growing economies globally.

Navigating External Headwinds and Data Scrutiny

This robust economic performance has been achieved amidst a challenging global environment, including trade tensions with the United States that saw tariffs on Indian exports. While an interim deal has provided some relief, the external sector remains a key variable. On the data front, the International Monetary Fund (IMF) had previously flagged concerns, assigning a 'C grade' to India's data. The recent overhaul by MoSPI is partly seen as a step toward addressing such concerns and enhancing the credibility and accuracy of its economic statistics.

Analysis: What the New Numbers Mean

The dual impact of strong growth and a revised calculation methodology presents a new lens through which to view the Indian economy. The inclusion of GST data provides a more formal and granular view of consumption and business activity. The sustained high growth in manufacturing is a positive sign for the government's 'Make in India' initiative. For investors, the consistent outperformance reinforces confidence in the domestic growth story. However, the release of the back-series data will be critical for establishing a clear, comparable trendline and understanding the true scale of the economy's momentum.

Conclusion

India's 7.8% GDP growth in Q3 FY26 is a testament to its economic resilience and the impact of the new data framework. With strong sectoral performance and a positive full-year forecast, the economy appears to be on a solid footing. The key event on the horizon is the release of the historical data series later in the year, which will provide the necessary context for long-term assessment and policymaking.