India's Q3 GDP Growth Hits 7.8% Under New 2023 Base Year

Introduction: Economy Shows Resilience

India's economy expanded by 7.8% year-on-year in the third quarter of the financial year 2025-26, demonstrating resilient momentum despite a slight moderation from the previous quarter. The data, released on February 27 by the Ministry of Statistics and Programme Implementation (MoSPI), marked the debut of a new GDP series with a revised base year of 2022-23. This growth, which surpassed many economists' expectations, was primarily powered by a robust manufacturing sector and consistent consumer spending, reinforcing India's position as the world's fastest-growing major economy.

A Landmark Statistical Revision

The introduction of the new GDP series with the 2022-23 base year, replacing the older 2011-12 series, represents a significant update to the country's national accounts. A base year revision is a standard practice to ensure that GDP figures accurately reflect the current structure of the economy. This update incorporates new data sources, such as GST collections for tax calculations, and improved methodologies like 'double deflation' for manufacturing. The aim is to provide a more precise picture of economic activity, sectoral contributions, and consumption trends, aligning India's statistical framework more closely with global standards.

Dissecting the Q3 Performance

The 7.8% real GDP growth in the October-December 2025 quarter marks a slowdown from the revised 8.4% expansion recorded in the second quarter (July-September). However, it represents an acceleration compared to the 7.4% growth seen in the corresponding period of the previous year under the new series. Nominal GDP, which includes inflation, grew by 8.9% during the quarter. The steady performance underscores the strength of domestic demand, which has helped insulate the economy from persistent global headwinds and trade uncertainties.

Manufacturing Emerges as the Growth Engine

The manufacturing sector was the standout performer, expanding at a double-digit pace of over 13% in Q3. This surge was a key driver of the overall growth figure. The broader secondary sector, which includes manufacturing, construction, and utilities, also recorded robust growth, reinforcing its role as a critical pillar of the current economic expansion. The government noted that manufacturing has been a major contributor to the economy's resilience over the past three financial years under the rebased series, showing double-digit growth in both FY24 and FY26.

Services and Consumption Remain Steady

The services sector, or tertiary sector, continued its strong performance, with overall growth projected to exceed 9% for the full financial year FY26. The category covering 'Trade, Repair, Hotels, Transport, Communication & Broadcasting Services' was particularly strong, registering a growth of 10.1%. On the demand side, private consumption provided a solid anchor. Private Final Consumption Expenditure (PFCE) expanded by 7.7%, signaling that household spending remains healthy despite earlier inflationary pressures. Investment activity also held firm, with Gross Fixed Capital Formation growing by 7.1%.

Key Economic Indicators: Q3 FY26

Areas of Slower Growth

While manufacturing and services powered ahead, some sectors experienced a noticeable slowdown. The primary sector, which includes agriculture and mining, saw its growth decline to 2.6% from 4.5% a year earlier. Agricultural activities grew by 2.4%, while mining and quarrying growth dipped to 4.1% from a robust 11.7%. The construction sector also saw its pace of expansion moderate to 6.6% from 8.7% in the previous quarter, indicating some unevenness in the recovery across different parts of the economy.

Revised Annual Projections

Alongside the quarterly data, the MoSPI released its Second Advance Estimates for the full financial year. Real GDP growth for FY26 is now projected at 7.6%, an upward revision from the earlier estimate of 7.4%. The new series has also led to revisions in historical data, with real GDP growth for FY24 now pegged at 7.2% and for FY25 at 7.1%. These figures paint a picture of sustained high growth over the past three years, driven by broad-based expansion across the industrial and services sectors.

Economic Outlook and Future Trajectory

Government officials expressed confidence in the economy's path forward. Chief Economic Adviser V. Anantha Nageswaran stated that based on current projections, India is on track to surpass the $1 trillion GDP mark in the financial year 2026-27. He also noted that the Economic Survey's growth projection for FY27 has been revised upward to a range of 7% to 7.4% under the new series. This outlook suggests that policymakers expect the growth momentum to continue, positioning India to become the world's third-largest economy by around 2029.

Why the New Series Matters

The shift to the 2022-23 base year is more than a statistical exercise. It enhances the credibility and accuracy of India's economic data, addressing earlier concerns from international bodies about outdated frameworks. By incorporating more recent data and improved estimation techniques, the new series offers a clearer view of the structural shifts in the economy. This improved transparency is crucial for policymakers crafting effective strategies and for investors making informed decisions. The data confirms that despite global challenges, the Indian economy's foundations remain strong, supported by domestic activity.

Conclusion

India's 7.8% GDP growth in Q3 FY26, framed by the new base year, highlights an economy that continues to expand at a formidable pace. While there is some moderation and sectoral variation, the headline numbers are supported by strong fundamentals in manufacturing and consumption. The updated statistical framework provides a more reliable lens through which to view this growth. Looking ahead, the provisional estimates for the full financial year, along with Q4 data, are scheduled for release on May 29, 2026, which will provide further clarity on the economy's trajectory.