India's economic expansion slowed to 7.8% in the October-December quarter compared with a year earlier, the National Statistics Office said, marking a deceleration from the 8.4% growth recorded in the previous quarter under a revised GDP series.
The moderation in headline growth coincided with a pullback in both public spending and private capital formation, though private consumption stayed resilient and manufacturing posted double-digit gains. The updated national accounts also caused modest changes to official forecasts for the coming financial years.
Revised projections and official statements
Under the new data series, the government now estimates the economy will grow 7.6% in 2025/26, the National Statistics Office reported. That is slightly higher than the 7.4% forecast that would have been implied by the old series. For financial year 2026/27, projections have been revised to a range of 7.0%-7.4% under the new methodology, according to Chief Economic Adviser V Anantha Nageswaran after the data release. In his annual report published last month, the economy had been projected to expand 6.8%-7.2% for 2026/27.
Nageswaran also said the South Asian nation is on track to comfortably cross the $4 trillion mark in the next financial year.
Trade frictions and policy responses
For much of the current financial year, the economy faced uncertainty tied to tariffs that have restrained exports. In response, the administration led by Prime Minister Narendra Modi stepped up domestic reforms - cutting consumer taxes on hundreds of items and advancing long-delayed labour reforms to bolster the domestic business environment.
Earlier this month New Delhi reached an interim agreement with Washington that reduces effective tariffs to 18%, a development officials say eases bilateral trade tensions, although the agreement has not been formally signed. The U.S. Supreme Court's order striking down President Donald Trump's global tariffs was cited as a factor that may improve India's position in upcoming interim negotiations. Separately, President Trump has announced a temporary 10% duty on all nations, including India, and said he plans to raise that duty to 15%.
Sectoral performance
Private consumption, a key driver of domestic demand, grew 8.7% year-on-year in October-December, accelerating from an 8.0% increase in the prior quarter. In contrast, government spending rose 4.7% year-on-year in the quarter, down from a 6.6% increase a quarter earlier. Private investment expanded 7.8%, below the 8.4% pace recorded in the previous quarter.
Manufacturing activity delivered a 13.3% expansion in the third quarter, slightly ahead of the 13.2% growth posted a quarter earlier. Financial services and hospitality sectors also remained strong.
Growth in farm output, which employs more than 40% of the workforce, slowed to 1.4% in the third quarter of the current fiscal year from 2.3% a quarter earlier.
"Service sector performance signals a strong lift, besides double-digit growth in manufacturing," said Radhika Rao, an economist at DBS Bank. "The October-December quarter also benefited from indirect tax rationalisation and festive demand, in addition to a better faring rural farm sector," she added.
Inflation and monetary policy outlook
With growth remaining firm, rating agency ICRA expects the Reserve Bank of India to hold policy rates steady, though inflation may tick up temporarily, according to its chief economist Aditi Nayar. The RBI kept its key repo rate unchanged earlier this month.
Statistical overhaul and methodological changes
India this year implemented a broad overhaul of its statistical framework. After updating the consumer price index, authorities revised the GDP series to better capture structural shifts in the economy. The revisions expand data inputs by incorporating Goods and Services Tax filings, corporate financial returns and digital platform data to widen coverage of economic activity.
At the center of the GDP revision is a move to more granular price deflation to enhance accuracy. Previously the accounts relied largely on input price deflators with a strong dependence on the wholesale price index. The methodological changes are intended to address concerns highlighted by the International Monetary Fund last year about India’s national accounts approach, including the use of an outdated 2011/12 base year and reliance on wholesale prices, which contributed to a "C" rating for the previous framework.
Summary
India's economy grew 7.8% year-on-year in October-December under a revised GDP series, down from 8.4% in the prior quarter. Strong private consumption and robust manufacturing underpinned growth even as government spending and private investment slowed. The statistical revision has modestly lifted short-term fiscal-year projections and aims to improve measurement through expanded data sources and more granular price deflation.