India’s economy is likely recorded a growth rate of around 7.35% in the October-December quarter (Q3) of FY26, according to a Financial Express poll of economists. This reflects a substantial slowdown from the 8.2% gross domestic product (GDP) expansion registered in the second quarter (July-September). The tempering is attributable to a relatively high base and a marginal normalisation in the pace of services sector expansion.
Economists noted that slower growth in the services and agriculture sectors is expected to be offset to an extent by a pick-up in industrial (manufacturing) performance.
The economy grew 6.4% in Q3FY25, compared with 5.6% in the previous quarter.
What do economists say?
Aditi Nayar, Chief Economist at ICRA, highlighted the challenges in estimating GDP growth under the impending new base year series. “We have anchored our outlook for Q3 to the existing GDP dataset across sectors, based on which we project GDP growth to have eased to 7.2% in Q3 FY26 from 8% in the first half of the fiscal,” Nayar said.
She cited contraction in government capital expenditure (capex), subdued state government revenue expenditure, and weak merchandise exports as key factors contributing to the sequential slowdown.
Gaura Sen Gupta, Chief Economist at IDFC First Bank, estimates that a pick-up in both urban and rural consumption demand would drive growth from the expenditure side.
She cited rural factors from rural demand improvement to strong crop output and rising rural wages, while stating that urban demand might have benefited from Goods and Services Tax (GST) cuts. “Meanwhile, a pick-up is also seen in the services and manufacturing sectors.
Strong growth in listed company profits, led by a pick-up in sales growth, is evident,” Sen Gupta said. She projected nominal GDP growth at 8.9% for Q3 FY26. Sen Gupta added that the GDP deflator would remain supportive, with slowdowns in both Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation boosting real growth rates.
Yuvika Singhal, Economist at QuantEco, said: “As per monthly data, we see annualised growth in government capex slipping into contraction over November-December 2025.” Singhal highlighted that GST rationalisation-led strength in manufacturing output is expected to remain intact in the quarter.
She added that GDP growth is likely to underperform Gross Value Added (GVA) growth, as net indirect taxes will be impacted by GST rationalisation weighing on tax collections.
Singhal also flagged a major caveat for Q3 GDP estimates: the impending introduction of a new GDP series with a revised base year, updated data sources, and improved methodology, which could lead to revisions in historical and current data.
Final projection
For the full 2025-26, economists in the poll projected GDP growth in the range of 7.4% to 8.3%. This aligns with the government’s First Advance Estimates released in January, which projected 7.4% GDP growth for the current financial year.