India’s economy is projected to grow at 7.2 per cent in FY26, according to the latest assessment by CareEdge Economic Meter (CEM). The Q3 FY26 reading shows strengthening momentum in manufacturing and mining, alongside mixed signals from construction, utilities, and agriculture.
Mining activity recovered in Q3, with the Index of Industrial Production (IIP) for mining expanding 3.8 per cent, compared with a contraction of 0.5 per cent in Q2. Coal production declined by 0.7 per cent, an improvement from the 1.3 per cent contraction recorded in the previous quarter. Manufacturing growth strengthened, with IIP manufacturing rising to 6.2 per cent in Q3 from 5.1 per cent in Q2.
High-frequency indicators pointed to improving industrial demand. Cement production increased 11.2 per cent in Q3 versus 7.3 per cent in Q2. Passenger vehicle production surged 18.3 per cent, while two-wheeler output rose 15 per cent, both significantly higher than the previous quarter.
Festive demand, GST rationalisation, and relatively stable inflation supported consumption, although domestic GST collections moderated due to rate adjustments. Non-petroleum, non-agriculture exports grew 8.8 per cent, slower than the 12.7 per cent recorded in Q2.
In services, non-food credit growth accelerated to 15.7 per cent from 13.3 per cent, with retail credit expanding 14 per cent. Port cargo traffic and domestic air cargo traffic grew 7.6 per cent and 6.8 per cent, respectively. Insurance indicators strengthened, as non-life premiums rose 11.4 per cent and life insurance first-year premiums increased 25 per cent.
However, services export growth eased to 7.5 per cent, and toll collection growth moderated to 12.2 per cent. Domestic air passenger traffic returned to positive territory with 1.7 per cent growth after a contraction in the previous quarter, indicating a gradual recovery in mobility-linked demand.
Construction activity weakened, with central government capital expenditure contracting 23.4 per cent in Q3, compared with 9.3 per cent growth in Q2, largely due to a high base effect. Electricity generation declined 4 per cent after marginal growth in the previous quarter. Agriculture export growth slowed to 5.9 per cent, while government expenditure on agriculture moderated to 6.2 per cent.
The updated GDP series with a 2024 base year incorporates improved measurement of the informal sector, technology-enabled surveys, expanded GST-linked datasets, proportional benchmarking, and double deflation in manufacturing. |
