India's economic growth slips to 7.8%, but still leads major nations

By Admin

28 Feb, 2026

India’s economic momentum moderated in the October–December quarter, with GDP growth easing to 7.8% year-on-year, compared to 8.4% in the previous quarter. Despite the slowdown, the country continues to hold its position as the world’s fastest-growing major economy, supported by resilient domestic consumption and a strong manufacturing base.

According to the National Statistics Office, the growth figures are based on a newly revised GDP data series aimed at improving measurement accuracy and reflecting structural changes in the economy.

Quarterly Performance Overview

The Indian economy grew 7.8% in the third quarter under the new data series, slightly lower than the previous quarter’s 8.4% expansion. The moderation was primarily due to easing government expenditure and private investment.

However, India’s performance remains robust compared to other major global economies, reaffirming its leadership position in global growth rankings.

Revised Growth Projections Under New Data Series

Under the updated statistical framework:

• GDP growth for FY 2025/26 is estimated at 7.6%, up from the earlier projection of 7.4% under the old series.
  
  

• For FY 2026/27, growth is projected between 7%–7.4%, revised upward from the earlier 6.8%–7.2% estimate.
  
  

Chief Economic Adviser V Anantha Nageswaran indicated that India is expected to comfortably surpass the $4 trillion GDP mark in the next financial year   a significant milestone in the country’s economic journey.

India Attempts to Overcome Tariff Challenges

Throughout the current financial year, India faced external headwinds from global tariff uncertainties that weighed on exports. In response, the administration of Narendra Modi accelerated domestic reforms.

Key measures included:

• Cutting consumer taxes on hundreds of items
  
  

• Advancing long-pending labour reforms
  
  

• Strengthening trade negotiations
  
  

New Delhi reached an interim understanding with Washington reducing effective tariffs to 18%, easing trade tensions. Meanwhile, former U.S. President Donald Trump announced a temporary 10% duty on all nations, including India, with a possible increase to 15%.

Additionally, a recent U.S. Supreme Court ruling striking down global tariff measures could potentially strengthen India’s trade position in upcoming negotiations.

Private Consumption Remains Strong

Domestic demand continues to be India’s strongest growth driver.

• Private consumption grew 8.7% year-on-year, compared with 8% in the previous quarter.
  
  

• Government spending increased by 4.7%, down from 6.6%.
  
  

• Private investment rose 7.8%, slightly lower than the previous 8.4%.
  
  

The festive season, tax rationalisation, and improving rural demand provided additional support to growth during the quarter.

Sector-Wise Performance

Manufacturing

Manufacturing expanded 13.3%, slightly higher than the previous quarter’s 13.2%, reinforcing India’s industrial momentum.

Services

Financial services and hospitality sectors remained resilient, contributing significantly to overall growth.

Agriculture

Farm output growth slowed to 1.4%, compared with 2.3% earlier. This sector employs over 40% of India’s workforce, making its performance critical to rural income and consumption trends.

Economist Radhika Rao of DBS Bank noted that the services sector and double-digit manufacturing growth provided a strong lift to the economy, complemented by festive demand and tax adjustments.

RBI Policy Outlook

Given the sustained growth trajectory, the Reserve Bank of India kept its key repo rate unchanged earlier this month. Rating agency ICRA expects the central bank to maintain a cautious stance as inflation may rise temporarily before stabilizing.

Statistical Overhaul Strengthens Credibility

India has undertaken a significant revamp of its statistical framework, including:

• Updating the Consumer Price Index
  
  

• Revising the GDP series
  
  

• Expanding data sources to include GST filings, corporate financial returns, and digital platform data
  
  

• Adopting more granular price deflation methods
  
  

Previously, the methodology relied heavily on the wholesale price index and the outdated 2011/12 base year.

The overhaul addresses concerns raised by the International Monetary Fund, which had rated India’s statistical framework “C” last year due to methodological limitations.

The Road Ahead

While quarterly growth has moderated, India’s economic fundamentals remain strong. Robust consumption, resilient manufacturing, structural reforms, and improved statistical transparency position the country for sustained expansion.

Crossing the $4 trillion milestone will further cement India’s standing as a key driver of global growth   even amid global trade uncertainty and evolving geopolitical dynamics.

India may have slowed slightly, but it continues to lead the world’s major economies with confidence and structural strength.