India’s GDP data has undergone a major overhaul. The National Statistics Office not just recalibrated the base year for GDP computation to 2022-23 from 2011-12 earlier, but more importantly, it introduced several methodological and computational refinements. The chiselling of the GDP data should widen the catchment area for real economic activity while improving policy precision.

Since the NSO has provided a deluge of GDP statistics, we will focus our assessment as per chronological order. 

Annual imprint and takeaways

There are four key takeaways from the annual GDP statistics.

• The size of the economy, as measured by the magnitude of the Nominal GDP, has undergone a downward adjustment in each of the years between FY23 and FY26. Notably, the size of the new annual Nominal GDP is lower compared to the old series by an average of 3.4%. 
  1. This will impact key GDP related ratios. For example, while the fiscal deficit will see a minor deterioration (the reported fiscal deficit for FY25 will now stand adjusted at 5.0% vs. 4.8% earlier), the savings and investment ratios will stand to gain (FY24 savings rate increased to 32.8% from 30.7% in old series, while investment rate improved to 34.5% from 31.4% in the old series).
  2. In dollar terms, the economy, which was previously expected to touch USD 4.1 tn in FY26, is now estimated to be a notch lower at USD 3.9 tn.
• While private consumption expenditure remains the major component of GDP, it saw a sharp reduction in its share (in Nominal GDP) to an average of 56.7% over FY23-FY26 from 61.1% in the old series. This perhaps reflects the impact from the incorporation of granular data from the HCES.
  1. This was offset by an improvement in the share of gross fixed capital formation to an average of 31.9% of GDP over FY23-FY26, up from 30.4% in the older series.
  2. Also, the share of exports saw a marginal improvement to an average of 22.7% of GDP over FY23-FY26, up from 21.8% in the older series.
  3. It is comforting to note that the share of discrepancies in GDP has narrowed to an average of 0.0% over FY23-FY26 from -1.9% in the older series. Going forward as volatility in discrepancies reduces, we hope it will cease to play the role of a statistical swing factor in the GDP data.
• As per sectoral classification, we note that the share of agriculture & allied sectors is now pegged higher at an average of 19.2% of Nominal GVA over FY23-FY26 vs. 17.6% in the old series. A similar outcome is witnessed for the industrial sector, whose average share is now somewhat higher at 27.9% in the Nominal GVA over FY23-FY26 vs. 27.4% in the old series.
  1. Improvement in the share of industrial sector is on account of the manufacturing sector. It is likely that the use of the extended MCA-21 database and incorporation of ASUSE and GST databases would have improved the computation capability of the NSO. 
  2. This was offset by a reduction in the share of Services to 52.9% of Nominal GVA over FY23-FY26 from 55.0% in the old series. 
• Real GDP growth over FY24 and FY25 saw sharp revisions, with the former getting downgraded by 198 bps, while the latter witnessed a 60 bps upgrade. Notably, the Second Advance Estimate of FY26 GDP now implies a moderate incremental acceleration to 50 bps, to a growth of 7.6%. In comparison, the old series had projected FY26 GDP to see a sharp incremental acceleration of 90 bps to 7.4%.
  1. The average Real GDP growth over FY23-FY26 is now reported as 7.3%, down from the estimate of 7.7% basis the older series.
  2. While the provision of historical data is insufficient to estimate the output gap as per the new series, it appears that there is a likelihood of the post-COVID negative output gap being somewhat wider than estimated earlier. 

Zooming in on the quarterly performance in FY26

Although GDP growth moderated, it remained healthy at 7.8% YoY in Q3 FY26 vis-à-vis 8.4% in Q2. The moderation was on account of government consumption expenditure, investments, and exports, even as private consumption expenditure posted an acceleration supported by the GST revamp that was implemented at the onset of the busy festive season.

On the sectoral side, GVA growth moderated to 7.8% YoY in Q3 FY26 from 8.6% in Q2. This was on account of agriculture and allied sector, non-manufacturing industrial sector, and public administration & other miscellaneous services. In contrast, incremental traction was registered for non-public administration services, including the manufacturing sector.

Basis the SAE (Second Advance Estimate) of FY26 GDP data and the reported data for Q1-Q3 FY26, we impute the implied growth rate for Q4 FY26.

• The implied GDP growth rate for Q4 FY26 is 7.3% YoY. This is largely on account of loss in traction in case of private consumption, exports, and investments. In contrast, government consumption is projected to offer a partially compensatory role.
• On the sectoral side, the incremental moderation in Q4 FY26 is projected to be led by the industrial sector as pickup in WPI inflation reduces the value-add. 

Inference and outlook

The much-awaited revamp of the GDP data is a welcome step as it enhances the signaling mechanism of economic activity by addressing some of the legacy concerns in the compilation of GDP statistics. Going forward, the expansion of the data suit by the anticipated roll out of Producer Price Index for India in the coming months will further strengthen its economic database.

Looking at the quarterly signal, one can infer that the momentum has begun to moderate somewhat as the salubrious impact of GST revamp gradually dissipates while input price inflation starts to inch from its depressed levels. More importantly, the geoeconomic and geopolitical uncertainty continues to remain highly elevated:

• After the initial encouraging development on the India-US trade deal, the recent ruling of the US Supreme Court against President Trump’s unilateral imposition of country-wise discriminatory tariffs under the IEEPA (International Emergency Economic Powers Act) has once again raised uncertainty. Although the level of absolute tariff on India is now lower at 10% vs. 18% earlier, there is now no relative tariff advantage as every country will now face the same level of tariff, at 10%.
• The geopolitical uncertainty with unsettled Russia-Ukraine concerns and potent risk of fresh escalation of a war involving Iran, remains alive. This needs a close watch as it could dampen global economic sentiment with potentially adverse implications for supply chains.

Having said, the domestic policy backdrop stays supportive and is expected to play a mitigating role. After an accelerated pace of repo rate reduction in CY25, the RBI has been prioritizing measures for liquidity infusion and credit offtake. Meanwhile, the pace of incremental fiscal consolidation will take a mild form in FY27 – in fact, the growth in central government expenditure is slated to improve to 7.7% from 6.6% in FY26.

We expect GDP growth to clock a 6.9% run-rate in FY27, moderately lower than the SAE estimate of 7.6% in FY26.

Table 1: New vs Old GDP: Key headline comparison

Note: Size of the GDP represents the nominal series, while economic growth represents the real annual change.

Table 2: India’s Quarterly GVA and GDP: Sectoral break-up of annualized growth

Table 3: India’s Annual GVA and GDP: Sectoral break-up of annualized growth

Note: GDP components, viz. Change in Stocks, Valuables, and Discrepancies have not been shown in the table on account of their volatility in annualized growth numbers.