India is set to release its Q3 GDP data, the first in the new series with the base year 2022-2023. Earlier the government was following 2011-12 as the base year. All eyes are on whether the quarterly growth numbers can match last quarter’s 8% plus reading. The debut of the new series and impact of the revised US tariff are the key factors that the street will watch out for.
Key ratings agency, CareEdge expects India’s real GDP growth to ease to 7.2% in Q3 FY26, compared with 8.2% recorded in the previous quarter. Gross value added (GVA) growth is projected at 7%, lower than 8.1% in Q2 FY26. CareEdge noted that policy measures such as income tax rationalisation, GST cuts, healthy rural activity and rate cuts thus far are expected to support growth, nevertheless.
Tariff relief may lift GDP growth in FY27: CareEdge
CareEdge also noted that according to their estimates, tariff reductions could add around 20 basis points to GDP growth in FY27.
Recently, the US Supreme Court struck down the broad global tariffs that Trump had imposed. In response, the Trump administration quickly imposed a new global tariff of 10% on most imports using Section 122.
Manufacturing and mining recovered in Q3FY26
CareEdge said that Manufacturing, mining and other high-frequency indicators are offering support.
In Q3FY26, industrial production in manufacturing rose 6.2%, improving from 5.1% in Q2FY26. Cement production grew 11.2%, while passenger vehicle production jumped sharply by 18.3%. Two-wheeler production also improved, rising 15% during the quarter.
Mining activity rebounded as well. IIP mining expanded by 3.8% in Q3 FY26, reversing a contraction seen in the previous quarter. Coal production continued to contract but at a slower pace.
Services sector shows mixed performance
The services sector presented a mixed picture in Q3 FY26. Credit growth remained strong, with non-food credit expanding 15.7%, up from 13.3% in Q2. Retail credit growth also improved during the quarter.
Transport-related indicators showed some recovery. Domestic air passenger traffic returned to growth after contracting in the previous quarter, while port cargo and air cargo traffic recorded higher growth.
However, services exports moderated to 7.5% in Q3 FY26, down from 8.7% in Q2. Toll collections and fuel consumption growth also softened, pointing to uneven demand conditions.
Construction, utilities and agriculture under pressure
Construction activity weakened during the quarter. Central government capital expenditure contracted sharply by 23.4% in Q3 FY26, largely due to an unfavourable base effect from last year. Growth in infrastructure and construction goods also slowed.
The utilities sector faced stress as electricity generation contracted by 4% in Q3, compared with marginal growth in the previous quarter.
Agriculture-related indicators also lost momentum. Agricultural export growth slowed to 5.9% from 17.3% in Q2, while government spending on agriculture and allied sectors eased significantly.
GDP revamp follows changes to inflation, IIP data
The government is expected to overhaul how it calculates real GDP growth. India measures real GDP – which adjusts for inflation – by deflating nominal GDP growth using price indices. Economists have raised concerns that the method is outdated, as it relies more on the wholesale price index (WPI) and not the more closely tracked consumer price index.
In November, the International Monetary Fund raised concerns over weaknesses in India’s national accounts methodology. The IMF cited the outdated 2011/12 base year, reliance on WPI and extensive use of single deflation. It assigned the framework a “C” rating.
The changes in the series for GDP data is part of a broader revamp of India’s statistics, following the release of a new retail inflation series earlier this month. Revisions to wholesale inflation and industrial output are also under way.
Secretary Saurabh Garg told Financial Express that a new WPI series with 2022-23 as base year is expected to be released in a couple of months.
At the core of the overhaul is the shift to double deflation, which separately adjusts output and input prices to measure real value added.