India economic growth is expected to moderate in the third quarter of the financial year 2025 to 26 with estimates indicating expansion of around 7.4 percent compared to 8.2 percent recorded in the previous quarter. According to a survey of 18 economists reported by Mint the slowdown reflects softer government expenditure and weaker export performance during the October to December period.
The third quarter growth data scheduled for release on February 27 carries additional significance as it coincides with a revision in the GDP base year to 2022 to 23. The change in base year may alter historical comparisons and potentially reshape interpretations of growth trends. Under the existing 2011 to 12 base year series economists expect the third quarter figure to fall within a range of 7.0 percent to 8.1 percent.
The moderation follows a robust second quarter performance which marked a six quarter high. However several factors are believed to have contributed to the sequential slowdown. Economists have cited an unfavourable base effect contraction in central government capital expenditure and subdued revenue spending by state governments as key reasons behind the softer momentum.
Aditi Nayar chief economist at Icra Ltd noted in the report that weak merchandise exports have also weighed on growth. Global trade conditions have remained uneven amid slowing demand in advanced economies and geopolitical uncertainties. These external pressures have affected export oriented sectors and contributed to moderation in overall output.
Despite these challenges festive season consumption and adjustments in Goods and Services Tax rates provided some support to domestic demand during the quarter. Private consumption has remained relatively resilient supported by urban spending and services activity. However economists suggest that public capital expenditure which played a significant role in boosting earlier growth phases showed signs of slowdown in the third quarter.
In the same quarter of the previous financial year India GDP growth had accelerated to 6.4 percent from 5.6 percent in the preceding quarter. The comparison highlights the influence of base effects and cyclical shifts in expenditure patterns. Analysts indicate that quarterly fluctuations do not necessarily signal structural weakness but reflect short term adjustments in spending and trade flows.
The transition to the new base year of 2022 to 23 is expected to incorporate updated consumption patterns production structures and price indices. Such revisions are undertaken periodically to better capture changes in the economy. Economists will closely examine how the revised series impacts sector wise growth estimates particularly in manufacturing services and agriculture.
Looking ahead analysts emphasize the importance of sustained investment momentum stable inflation and improved export performance to maintain growth near current levels. While a reading of 7.4 percent would still position India among the faster growing major economies moderation in public spending and global trade headwinds remain areas to monitor.
The official data release will provide clearer insights into sectoral contributions and the underlying drivers shaping India growth trajectory in the third quarter of FY26.
