India’s economy is likely to have expanded more than 8 per cent in the October to December quarter of FY26, according to a nowcast by State Bank of India’s (SBI) research team, even as sweeping changes to the GDP base year and methodology cloud the direction of future revisions.
In a report, SBI Research pegged real gross domestic product (GDP) growth for Q3 FY26 at 8.0 to 8.1 per cent year-on-year, driven by resilient domestic demand and improving high-frequency indicators. The projection comes ahead of the government’s second advance estimates due on February 27, which will incorporate a new GDP base year of 2022–23.
“Overall, we expect Q3FY26 real GDP growth closer to 8.1 per cent. Given significant methodological changes, it is difficult to predict the direction of revision,” the report said. India’s GDP growth for FY26 is estimated at 7.4 per cent as per the first advance estimate, with momentum largely supported by domestic demand. The latest Economic Survey has placed India’s potential GDP at around 7 per cent, projecting growth in the range of 6.8 to 7.2 per cent in FY27.
SBI’s composite leading indicator (CLI), which tracks 50 indicators spanning consumption, agriculture, industry and services, shows a broad-based acceleration. The proportion of indicators signalling acceleration rose to 87 per cent in Q3 FY26, compared with 80 per cent in Q2. The bank said its CLI is based on monthly data points to the upward momentum in economic activity.
The results indicate statistically significant factor loadings across key variables, suggesting the model meaningfully captures cyclical dynamics. The bank projected real GDP and gross value added growth in the range of 8.0 to 8.1 per cent for the quarter. The upbeat assessment comes amid a major statistical overhaul. India is shifting its GDP base year from 2011–12 to 2022–23, with the new series to be released alongside the second advance estimates. The revision will also align with an updated CPI base of 2024.
Opposition Questions Growth Numbers
India’s economic growth accelerated sharply in the July to September quarter of FY 2025-26, with GDP rising 8.2 per cent year-on-year, driven by strong momentum in the secondary and tertiary sectors, data released by the National Statistics Office (NSO) showed. The key driver of the expansion was the broad-based improvement in the secondary sector, which grew 8.1 per cent in real terms, powered by manufacturing and construction.
Earlier, the Congress party questioned the GDP figures released by the Centre, arguing that indicators such as rising unemployment, declining foreign direct investment and weakness in manufacturing point to discrepancies in the official data. The party said these trends suggest that the BJP-led government’s growth numbers may not reflect the underlying economic reality.
In a report titled Real State of the Economy 2026, authored by Congress research department chairperson MV Rajeev Gowda, the party described a “central contradiction” in the economy, the concentration of wealth among a narrow segment of the population alongside an erosion of public welfare protections.
The report stated, “The data showed that the 8.2 per cent GDP growth was driven by a surge in manufacturing, which reportedly grew at 9.1 per cent in the second quarter and 8.4 per cent half-yearly (April-September 2025). However, during the same half year, the Index of Eight Core Industries, which make up 40 per cent of the Index of Industrial Production, grew by only 2.9 per cent. Such wide disparities add to the doubts surrounding the government’s statistics.”
INC report noted that while official data showed GDP growth of 8.2 per cent in the second quarter of FY26, well above expectations, broader structural concerns persist. Notably, the quarterly report by NSO, which was based on methodology using 2011-12 as the base year, showed the sharpest quarterly expansion in recent quarters, surpassing the 5.6 per cent recorded in the same quarter last year.
The INC report further alleged that confidence in India’s official economic data has eroded under the Modi government, claiming that statistics are shaped to fit political objectives. It said concerns deepened after the International Monetary Fund (IMF) assigned India’s statistical system a C grade, signalling certain shortcomings, and argued that this assessment necessitates a thorough review of GDP growth figures to verify their credibility and examine whether they reflect the core drivers of economic growth.
In December last year, Finance Minister Nirmala Sitharaman, however, downplayed the IMF's ‘C’ rating, saying the assessment stemmed from an outdated base year rather than shortcomings in the country’s statistical system. Addressing the Lok Sabha, Sitharaman said the IMF’s observation showed the need to update India’s base year for calculating GDP and related indicators.
The IMF had noted “methodological weaknesses” in national accounts statistics, which include GDP, consumption and income data, adding that these issues “somewhat hamper surveillance.” Sitharaman insisted this did not amount to questioning India’s growth numbers.
Additionally, India also received an overall ‘B’ grade across other statistical categories, including inflation, government finances, the external sector, monetary and financial data, and inter-sectoral consistency. Sitharaman maintained that the upcoming base-year revision will strengthen the country’s data architecture and respond to the IMF’s methodological concerns.
According to the SBI Research report, the revamped methodology will better capture the current economic structure, including digital commerce and services, and improve measurement of the informal sector. New data sources such as GST records, e-Vahan vehicle registration data, natural gas consumption, and Public Financial Management System data will be incorporated.
The compilation will also move towards double deflation in manufacturing, where output and intermediate consumption are separately deflated, and adopt more granular price indices such as commodity-level unit value indices for trade data. In quarterly national accounts, the Denton proportional benchmarking method will replace the earlier pro-rata approach to reduce artificial discontinuities.
Indian Economy Beyond Methodology
Beyond methodology, SBI flagged supportive demand conditions. Rural consumption has picked up in Q3 FY26, aided by positive signals from farm and non-farm activity. Urban consumption, backed by fiscal stimulus, has shown a consistent uptick since the festive season.
However, the report noted a challenging global backdrop. Global growth is projected at 3.3 per cent in 2025 and 2026, amid geopolitical tensions and structural shifts. The United States has imposed a temporary global tariff of up to 15 per cent under Section 122 of its 1974 Trade Act for up to 150 days, adding to trade uncertainty.
On the banking front, aggregate deposits of scheduled commercial banks grew 12.5 per cent year-on-year as of late January, while credit growth stood at 14.6 per cent. Public sector banks have shown improved profitability indicators in Q3 FY26, with three lenders reporting gross non-performing assets below 2 per cent.
SBI Research cautioned that while momentum appears strong, upcoming base revisions could alter past and current growth prints. |
