India's Q3 GDP Growth Hits 7.8% Under New 2026 Data Series

Introduction: Economy Shows Robust Momentum

India's economy demonstrated strong performance, expanding by 7.8% in the third quarter (October-December) of the fiscal year 2025-26. This announcement, made by the Ministry of Statistics and Programme Implementation (MoSPI), is the first under a newly introduced GDP series with a revised base year of 2022-23. The data surpassed consensus estimates, which hovered around 7.6%, reinforcing India's status as the world's fastest-growing major economy. For the full fiscal year, the government has revised its real GDP growth projection upward to 7.6%, signaling sustained economic resilience despite global headwinds.

A Deeper Look at the Numbers

The robust 7.8% growth in Q3 follows an even stronger performance in the second quarter, which was revised to 8.4%. The government's second advance estimates project the economy to reach a level of ₹322.58 lakh crore in real terms for FY26. This represents a 7.6% increase over the previous fiscal year's (FY25) estimate of ₹299.89 lakh crore. The economy had previously recorded real GDP growth of 7.1% in FY25 and 7.2% in FY24. Nominal GDP, which includes inflation, is projected to grow by 8.6% in FY26, reaching ₹345.47 lakh crore. This indicates a moderation in price pressures, as the gap between real and nominal growth has narrowed.

Overhauling GDP Calculation: The New Series

The most significant aspect of this data release is the shift in the base year for GDP calculation from 2011-12 to 2022-23. This rebasing exercise is designed to provide a more accurate and contemporary picture of the Indian economy. A key methodological improvement is the adoption of the 'double deflation' method. This technique separately adjusts input and output prices to measure real value added, which is expected to yield more precise estimates, particularly for the manufacturing sector where input-output price dynamics can be complex. The new series also incorporates a wider range of high-frequency data indicators, including GST data for corporate allocation, e-Vahan data for transport consumption, and Public Finance Management System (PFMS) data for government expenditure, making the estimates more robust.

Why the Change Was Necessary

The revision addresses long-standing needs to align India's national accounts with modern economic realities. The previous 2011-12 base year did not fully capture the structural shifts that have occurred over the last decade, such as the rise of the digital economy and gig work. These fast-growing segments are expected to have greater prominence in the new series. The update also comes after the International Monetary Fund (IMF) assigned a 'C' rating to India's national accounts statistics in November 2025, highlighting certain methodological weaknesses. The new framework aims to address these concerns and improve the international comparability and credibility of India's economic data.

Sectoral Performance and Key Drivers

The manufacturing sector has emerged as a standout performer and a primary engine of growth under the revised series. It recorded double-digit growth in both FY24 and FY26, underscoring a strong industrial recovery. The services sector also displayed broad-based strength, with the tertiary sector as a whole growing over 9% in FY26. Within services, the 'Trade, Repair, Hotels, Transport, Communication & Broadcasting Services' category expanded by a notable 10.1%. On the demand side, the growth was balanced. Both private consumption and investment registered growth of over 7%, indicating healthy household spending and sustained capital formation, which are crucial for long-term expansion.

Key Economic Indicators Summary

Market and Economic Implications

The stronger-than-expected GDP figures have positive implications for the economy. For equity markets, the robust growth strengthens the outlook for corporate earnings, particularly for sectors tied to domestic demand. For debt markets, the improved growth enhances the government's fiscal position by providing a larger denominator for debt-to-GDP ratios, potentially creating more fiscal space. Economists note that the revised methodology could alter perceptions of when India might overtake Japan to become the world's fourth-largest economy. The data also has implications for monetary policy, with some analysts suggesting that the strong growth momentum makes further interest rate cuts by the Reserve Bank of India highly unlikely in the near term.

Expert Commentary and Analysis

Analysts have largely viewed the data positively, highlighting the economy's underlying strength. Sujan Hajra of Anand Rathi Group noted that the trends under the new series are broadly consistent with the old one, which is reassuring. He pointed to the balanced expansion in consumption and investment as a positive sign for both equity and debt markets. Radhika Rao from DBS Bank commented that the new series appears to capture a marginally stronger growth momentum by incorporating updated production structures and better data sets. Alexandra Hermann of Oxford Economics suggested that the measured growth trajectory is likely to be structurally higher under the new series, skewing monetary policy risks towards a potential rate hike rather than a cut.

Conclusion

India's Q3 GDP growth of 7.8% under the revised 2022-23 base year confirms the economy's robust health and sustained momentum. The methodological overhaul provides a more accurate reflection of the country's evolving economic structure, capturing new growth drivers more effectively. With strong performances in manufacturing and services, supported by solid consumption and investment, the outlook remains positive. Looking ahead, the focus will be on harnessing this growth to achieve fiscal consolidation and maintain macroeconomic stability, as the economy is projected to continue its expansion into FY27.