India’s economy grew 7.8% in December quarter; to end FY26 with 7.6% expansion

New Delhi: The new GDP series released by the statistics ministry on Friday pegged India’s economic growth at 7.8% for the October-December quarter, faster than the 7.4% growth seen in the same time a year ago.

For the earlier June and September quarters, GDP growth has been revised to 6.7% and 8.4%, from 7.8% and 8.2% estimated earlier.

The estimate for the full fiscal year FY26 has also risen to 7.6% from the 7.4% estimated in January. Economic growth in the previous fiscal year was given as 7.1% in the new series.

Chief economic advisor in the finance ministry V. Anantha Nageswaran told mediapersons at a briefing after the release of the data that the anticipated growth in the March quarter real GDP is 7.3% or more, in order to be able to achieve the full-year real GDP growth of 7.6%.

“I think the momentum in the economy is good enough to deliver us that 7.3% in the fourth quarter,” Nageswaran said.

For the coming financial year (FY27), Nageswaran raised the growth forecast to 7-7.4%, explaining that while the Economic Survey had projected a real GDP growth range of 6.8-7.2% in January, but subsequently, India has arrived at a trade framework agreement with the US, which is why the GDP outlook for FY27 has been raised under the new series.

He added that the economy is likely to achieve a number closer to 7.4% rather than 7%. “Of course, global uncertainties are to be kept in mind,” Nageswaran said.

The strong growth is underpinned by robust manufacturing and services sector growth, with factory output expanding at above 10% since September quarter of FY25.

In the new series, 2022-23 is used as the base year, replacing 2011-12. Alongside, it has taken into account newer sources of data and employs new methodology to make GDP estimation more accurate and reliable, according to the ministry. GST data and data from e-Vahan are also used extensively in the new GDP series.

Saurabh Garg, secretary in the ministry of statistics and programme implementation, told mediapersons at the briefing that the government has given a lot of attention to having a more granular availability of data so that the state domestic product is captured much more effectively.

To be sure, the new series has also reduced the size of India’s economy by ₹11 trillion ($133 billion) to ₹345.47 trillion ($3.93 trillion).

Data from the new series showed India’s real GDP grew 7.1% in FY25, compared to 6.5% in the previous data series. However, the growth estimate for FY24 in the new series comes down to 7.2% compared to the earlier reported 9.2% in the old series.

The 7% plus growth seen since FY24 corroborates the Economic Survey’s assessment this year that the economy’s medium term growth potential is a 7% expansion.

In nominal growth terms — without adjusting for inflation — GDP is expected to expand at 8.6% in FY26, compared to 9.7% in the same time a year ago, statistics ministry data showed.

Sustained growth trajectory

Nageswaran said that the post-covid trend of sustained growth in a moderate inflationary scenario is set to continue in FY27.

In light of the GDP base year revision, nominal GDP being lower roughly by ₹11 trillion, the estimated fiscal deficit for FY26 will now be 4.5% in place of the 4.4% projected in the budget. However, other indicators like primary deficit, revenue deficit, effective capital expenditure or capital expenditure to GDP remained broadly unchanged, Nageswaran said.

The GDP revision does not alter the fiscal consolidation trajectory the government is following, at this point, Nageswaran said.

D.K. Srivastava, chief policy advisor at EY India, noted that under the series, real GDP growth numbers have been revised upwards while nominal growth has been generally revised downwards.

“Since the fiscal deficit is calculated as a share of GDP, a lower GDP base automatically pushes the ratio up, raising the 2025‑26 (RE) fiscal deficit estimate from 4.36% to 4.51% of GDP even though the deficit amount itself is unchanged,” said Srivastava.

Data showed India remains the fastest growing major economy in the world, with China expanding 4.5%, the US at 2.2%, the Euro area at 1.3%, and the UK at 1% in the December quarter.

Still going strong

Experts feel that with the moderation in nominal GDP estimates and the weakness of rupee against the US dollar, the Indian economy may still require some time to catch up with the fourth largest economy, Japan.

However, in response to questions, Nageswaran said that India is on course to be among the top three or four largest economies in the world.

“There's no doubt about that. It will happen in the course of the next few years. Our growth rate post covid has been probably one of the best, if not the best in the world, especially among the G20 economies,” he said.

He added that whether a particular relative position is reached or not will also depend on a lot of factors, such as the currency exchange rate, which in the case of rupee, did not go in its favour in 2025-26.

Global uncertainties, exchange rate changes and the growth rates in other countries will influence the relative size of India’s economy in dollar terms, he said.

India will comfortably cross the $4 trillion nominal GDP mark in 26-27, Nageswaran said.

Changing hues of the economy

The revised GDP estimation methodology shows the changing composition of India’s economy. The share of government spending stands at 10.2% in FY26, sharply above the 8.9% estimated under the earlier series in the January estimate. Since FY23, it has been above 10% as per the new series, above the levels seen under the earlier series.

India’s manufacturing sector grew at 13.3% in the December quarter, while the tertiary sector comprising services grew at 9.5%, and agriculture and allied services at 1.4%.

Private final consumption expenditure (PFCE), the largest driver of growth, expanded at 8.7% in the December quarter, while government spending expanded at 4.7%, and investments in fixed assets (gross fixed capital formation) at 7.8%.

In the full fiscal year, household spending is estimated to grow 7.7%, government spending at 6.6% and investments in fixed assets at 7.1%.

Investment activity seems to have strengthened, while government capital expenditure remains strong and early signs of a pickup in private investment are visible, said Rumki Majumdar, economist at Deloitte India.

“With consumption growth coming in at 8.7% (in December quarter), we expect investment spending to only improve going forward,” said Majumdar.

As per information available from the statistics ministry, in the new series, estimates of the household sector are updated with the annual survey of unincorporated sector enterprise (ASUSE) and the Periodic Labour Force Survey (PLFS).

These surveys will measure the dynamism in the household sector more accurately and regularly, the statistics ministry said in a set of ‘frequently asked questions’.