India Remains Fastest Growing Major Economy at 7.8 Percent

India reported an economic growth rate of 7.8% for the October-December quarter, maintaining its position as the world's fastest-growing major economy despite a moderation from the 8.4% expansion recorded in the previous quarter. The latest figures, released under a newly overhauled statistical series, reflect a resilient domestic market bolstered by robust private consumption and a surge in manufacturing activity. According to the National Statistics Office, the economy is projected to grow by 7.6% for the 2025/26 financial year, a slight upward revision from previous forecasts.

Chief Economic Adviser V Anantha Nageswaran stated that the country is on track to surpass the $4 trillion mark in the upcoming financial year. For the 2026/27 period, growth forecasts have been revised to a range of 7% to 7.4%. This outlook is supported by a significant overhaul of the national statistical framework, which now utilizes more granular data from corporate filings and digital platforms to better capture economic activity.

The trade landscape remains a focal point for policymakers as the administration navigates global tariff uncertainties. New Delhi recently reached an interim agreement with the United States that reduces effective tariffs to 18%, though the deal has yet to be formally signed. This development follows a U.S. Supreme Court ruling that struck down certain global tariffs, potentially improving the trade position for South Asian exporters. However, challenges remain as new proposals in Washington suggest a temporary 10% duty on all nations, with the potential to rise to 15%.

Internal dynamics showed a divergence in growth drivers during the third quarter. Private consumption expanded by 8.7% year-on-year, up from 8% in the prior quarter, while manufacturing output jumped by 13.3%. Conversely, government spending growth slowed to 4.7% and private investment eased to 7.8%. The agricultural sector, which supports a significant portion of the workforce, saw growth decelerate to 1.4% from 2.3% in the previous period.

Service sector performance signals a strong lift, besides double-digit growth in manufacturing.

Radhika Rao, an economist at Singapore-headquartered DBS GROUP HOLDINGS LTD, noted that the quarter benefited from indirect tax rationalization and strong festive demand. Meanwhile, ICRA Limited expects the central bank to maintain its current interest rate stance to manage potential inflationary pressures.

The Reserve Bank of India is expected to keep its key repo rate unchanged as inflation is likely to rise temporarily.

The transition to the new GDP series addresses previous concerns raised by the International Monetary Fund regarding the accuracy of national accounts. By shifting away from a heavy reliance on wholesale price indices and adopting a more modern base year, the government aims to provide a more transparent and accurate reflection of the country's structural economic changes.