NEW DELHI: India's economy grew 7.8 per cent in the October-December 2025 quarter (Q3 FY26), according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) under the new GDP series with base year 2022-23 [citation:4][citation:10]. The growth, while moderating from 8.4 per cent in Q2, was healthier than anticipated and signals sustained economic momentum, economists said [citation:1][citation:3].
GDP at a glance (Q3 FY26)
The Second Advance Estimate (SAE) for FY2026 has been pegged at a robust 7.6 per cent, up from 7.1 per cent in FY2025, with manufacturing and services segments expected to witness improvement [citation:1][citation:7]. Real GDP is now estimated at ₹322.58 lakh crore in FY2025-26, compared to ₹299.89 lakh crore in 2024-25 [citation:1][citation:3].
New GDP series: The shift to the 2022-23 base year from 2011-12 reflects the evolving structure of the economy. The updated methodology uses granular datasets such as GST filings and corporate financials, ensuring more accurate measurement of economic activity [citation:1][citation:3][citation:7].
Sectoral performance: Manufacturing shines
Manufacturing Gross Value Added (GVA) expanded in double digits for the fifth consecutive quarter in Q3 FY26, pointing to continued strength in the industrial segment [citation:1][citation:3][citation:7]. The secondary and tertiary sectors both registered growth above 9 per cent in FY2025-26, underscoring broad-based expansion [citation:4][citation:10].
Services surge: Within services, the 'Trade, Repair, Hotels, Transport, Communication & Broadcasting Services' category surged 10.1 per cent at constant prices [citation:4]. Garima Kapoor, Economist at Elara Capital, noted that contact-intensive services are witnessing close to low double-digit growth [citation:1][citation:6].
Demand side: Consumption & investment pick up
On the expenditure side, private consumption (PFCE) and investment (GFCF) both registered growth above 7 per cent in FY2025-26, signaling improving household spending and continued capital formation [citation:4]. This broad-based demand recovery provides a strong foundation for future growth.
External sector: CAD widens to $13.2 bn
Alongside the GDP data, RBI released current account deficit (CAD) numbers for Q3. CAD widened to $13.2 billion (1.3% of GDP) from $11.3 billion (1.1% of GDP) a year ago, driven by a higher merchandise trade deficit which increased to $93.6 billion from $79.3 billion [citation:9].
Net services receipts provided a buffer, rising to $57.5 billion from $51.2 billion. However, foreign exchange reserves saw a net depletion of $24.4 billion in the December quarter on a balance of payments basis [citation:9].
- Q3 GDP growth: 7.8% (moderates from 8.4% in Q2) [citation:4][citation:10]
- FY26 growth estimate: 7.6% (SAE) vs 7.1% in FY25 [citation:1][citation:3]
- Manufacturing GVA: Double-digit for 5th consecutive quarter [citation:1][citation:7]
- Services growth: Trade, hotels, transport segment up 10.1% [citation:4]
- Q3 CAD: $13.2 bn (1.3% of GDP) vs $11.3 bn (1.1%) YoY [citation:9]
- Nominal GDP growth FY26: 8.6% under new series [citation:4]
Expert views: New series enhances credibility
Better data, stronger confidence
Rajeev Juneja, President, PHDCCI, said the revised GDP framework will enhance the credibility and analytical usefulness of India's national accounts statistics. "The updated methodology is expected to provide policymakers, businesses, and investors with a more accurate picture of economic activity across sectors" [citation:1][citation:3][citation:7].
Real estate & construction
Sidharth Chowdhry, MD, Dalcore, noted that the use of granular datasets such as GST filings and corporate financials will ensure more accurate measurement of construction and development activity. "With better measurement of sectoral output and demand trends, developers and investors can plan with greater confidence" [citation:1][citation:6].
India remains in high-growth club
Garima Kapoor, Elara Capital, said the latest GDP data keeps India firmly in the high-growth club, with manufacturing, construction, and services all firing [citation:1][citation:3][citation:7].
GDP growth trajectory (new series)
| Period | GDP Growth (%) | Remarks |
|---|---|---|
| Q3 FY26 (Oct-Dec 2025) | 7.8% | Moderates from Q2; above expectations |
| Q2 FY26 (Jul-Sep 2025) | 8.4% | Robust quarter under new base |
| FY26 Advance Estimate | 7.6% | Up from 7.1% in FY25 |
| FY25 (Actual) | 7.1% | Previous year comparison |
Market context: Strong macro, cautious markets
Despite strong GDP numbers, benchmark indices logged their third-worst weekly fall of 2026 in the week ended February 27, with information technology stocks leading the slide amid global uncertainty [citation:8]. The contrasting trends highlight that while domestic fundamentals remain robust, global factors—including Middle East tensions and US tariff moves—are influencing market sentiment.
Chief Economic Adviser noted that with the new GDP series, India is on course to approach the $4 trillion economy mark by FY27 [citation:8].
Risks to watch
While the GDP print is encouraging, challenges remain: (1) Government capex declined 23.4% YoY in Q3, which proved a drag on growth [citation:2]; (2) Manufacturing PMI cooled to 55.0 in December from 57+ levels earlier [citation:2]; (3) Rupee under pressure, trading around 91 per dollar [citation:5]; (4) US tariff uncertainty and global trade tensions [citation:2][citation:8].
Key takeaways for investors
- Growth momentum sustained: 7.8% Q3 GDP confirms India as fastest-growing major economy [citation:1][citation:10].
- Manufacturing strength: Double-digit GVA growth for five consecutive quarters signals industrial resilience [citation:1][citation:7].
- New GDP series enhances credibility: GST data, corporate filings improve accuracy [citation:3][citation:6].
- Consumption & investment picking up: PFCE and GFCF both above 7% [citation:4].
- CAD widens but services exports cushion: $13.2 bn deficit manageable; forex drawdown needs watching [citation:9].
- Capex slowdown a concern: Government spending fell in Q3; private capex yet to fire [citation:2].
- $4 trillion economy in sight: FY27 target within reach [citation:8].
Outlook: Strong fundamentals, global headwinds
The 7.8% Q3 GDP print reaffirms India's position as a global growth leader. With the new series providing more accurate data, policymakers and investors can make better-informed decisions. However, near-term market sentiment will remain hostage to global developments—Middle East conflict, crude prices, and US trade policy. For long-term investors, any dip caused by global factors may offer entry points into domestic cyclicals (banks, capital goods, consumption) that stand to benefit from India's structural growth story.
Disclaimer: The analysis and broker views are for information only. Please consult your advisor before taking positions.