India Government Consumption

Economic growth eases in October–December 2025, but still rapid

GDP growth stays strong: India's GDP increased 7.8% in annual terms in October–December, following a 8.4% expansion in the previous quarter. The print was in line with market expectations, and the first that India’s statistical office has calculated using its new methodology, which features a new base year (FY 2022), as well as using a wider range of datapoints to estimate the final figures. According to the revised figures, India’s economy is set to end March about 3.3% smaller than the statistical office originally projected.

Slump in net trade outweighs stronger growth in consumer spending: Compared to the previous quarter's data, readings in October–December softened for government consumption (+4.7% on a year-on-year basis vs +6.6% in July–September), fixed investment (+7.8% vs +8.4% in July–September) and exports of goods and services (+5.6% vs +10.2% in July–September). In contrast, readings picked up for private consumption (+8.7% vs +8.0% in July–September) and imports of goods and services (+8.6% vs +5.9% in July–September). With imports accelerating as a result of strong consumer demand and exports decelerating as a result of U.S. tariffs, net trade declined at the sharpest rate since April–June 2023 in October–December. More positively, lower inflation and interest rates plus cuts to consumption taxes aided consumer spending.

Panelist insight: EIU analysts commented: “We have raised our estimate of real GDP growth in 2025/26 from 7.4% to 7.6%, given the base year revision. We retain our real GDP growth forecast of 7.2% for 2026/27, based on continued support from domestic demand and an eventual trade agreement with the US.” On the ability of India to respond to the Iran war, HSBC’s Justin Feng and Frederic Neumann commented: “India arguably has more leeway to run a wider [fiscal] deficit given its growth profile and economic heft, and may find some near-term relief from a 30-day US waiver to buy Russian oil. That said, India's strategic oil reserves are limited (~30 to 70 days) compared with other large Asian economies such as mainland China (~110 to 140 days) and Japan (~200 to 250 days).”

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