By Nikunj Ohri and Shubham Batra
NEW DELHI, Feb 27 (Reuters) – India’s economy grew 7.8% in October-December from the same period a year earlier, down from an 8.4% expansion in the previous quarter as growth in government spending and investment slowed, even as private consumption rose strongly.
For the full fiscal year ending in March, the government expects the South Asian economy to have grown by 7.6%, the National Statistics Office said as it unveiled a revised series of national output data. It had been forecast to grow by 7.4% under the old data series.
At this pace, India remains the fastest-growing major economy globally.
INDIA ATTEMPTS TO OVERCOME TARIFF CHALLENGES
Prime Minister Narendra Modi’s government has undertaken to revamp economic data, including for inflation and gross domestic product, by expanding the sources of information and updating the base year to 2022-23, among other changes. The adjustments aim to address criticism of outdated data practices and enhance accuracy.
India’s nominal GDP for 2025/26, which excludes the impact of inflation, is estimated to grow at 8.6%.
While presenting the budget for financial year 2026/27 earlier this month, the government estimated India’s nominal growth rate for the next year at 10% under the old base year.
For much of the current financial year, India’s economy has contended with uncertainty from tariffs, which have weighed on exports.
In response, Modi’s administration accelerated domestic reforms, including cutting consumer taxes on hundreds of items and pushing ahead with long-delayed labour reforms.
Earlier this month, New Delhi reached an interim agreement with Washington that reduces effective tariffs to 18%, easing trade tensions although the deal has yet to be formally signed.
The U.S. Supreme Court’s order striking down President Donald Trump’s global tariffs may improve India’s trade position in its upcoming interim negotiations. Meanwhile, Trump has announced a temporary 10% duty on all nations, including India, and promised to raise it to 15%.
Under the new GDP series, private consumption was seen expanding by 8.7% year-on-year in the October-December period compared with an 8% expansion in the previous quarter.
Government spending rose 4.7% year-on-year in October-December, down from a 6.6% increase the previous quarter while private investment is expected to rise 7.8%, lower than the 8.4% growth a quarter ago.
Manufacturing grew at 13.3% in the third quarter, compared with 13.2% a quarter ago. Financial services and hospitality sectors held strong.
Growth in farm output, a sector which employs more than 40% of the workforce, was seen slowing to 1.4% in the current fiscal year from 2.3% a quarter ago.
“Service sector performance signals a strong lift, besides double-digit growth in manufacturing,” said Radhika Rao, economist at Singapore-headquartered DBS Bank.
“The October-December quarter also benefited from indirect tax rationalisation and festive demand, in addition to a better faring rural farm sector,” Rao said.
(Reporting by Nikunj Ohri and Shubham Batra in New DelhiEditing by Gareth Jones and Toby Chopra)
