India Q3 Growth Estimated at 7.3% Despite High US Tariff
By Reuters | 24 Nov, 2025

India's GDP growth remained strong on vigorous rural and government spending despite subdued capital investments.

India's economy likely grew 7.3% in the July–September quarter, according to a Reuters poll of economists, underpinned by strong rural and government expenditure even as private capital spending remained subdued.

Household consumption, which accounts for roughly 60% of the economy, strengthened in the previous quarter as rural spending improved on better agricultural output. Urban demand and private investment continued to lag, suggesting uneven growth in Asia's third-largest economy.

Government spending, a key driver of growth in recent years, also likely persisted in Q2 of this fiscal year.

India remains one of the world's fastest-growing major economies in the face of U.S. President Donald Trump raising tariffs on Indian goods to 50% in August, a move that has contributed to foreign investors pulling out a net $16 billion from Indian equities so far this year.

Most economists say the deflator, used to strip out the effect of inflation to show "real" economic growth, was likely very low, making Asia's third-largest economy seem a bit stronger than it really is.

Indian gross domestic product (GDP) expanded 7.3% year-on-year in the July–September period, down from a better-than-expected 7.8% in the previous quarter, according to the median forecast from a Reuters poll of 61 economists conducted November 18–24. Estimates ranged from 6.0% to 8.5%.

"As far as the drivers of growth are concerned, private consumption and central government capex expenditure will remain the key supports for growth now, while private sector capex investment will likely grow at a slower pace due to the persisting global uncertainty," Kaushik Das, India chief economist at Deutsche Bank, said.

The data are due Friday, November 28 at 1030 GMT.

Economists are more cautious on the medium-term outlook, predicting GDP growth to slow to 6.8% this quarter and 6.3% in the quarter ending in March 2026.

STATISTICAL BOOST

A low deflator - which falls when inflation cools - also provided a boost to the latest data, as it did in the previous quarter, several economists said.

"GDP will benefit from a lower base and an exceptionally low deflator, which will artificially prop up real GDP growth ... But nominal GDP growth will likely continue to be weak," Deutsche Bank's Das said.

Wholesale price inflation was negligible and consumer inflation was on average around 2% between July–September.

Inflation has since fallen to less than half a percent.  

"Inflation projections now for the rest of the year also remain soft," Rajni Thakur, chief economist at L&T Finance, said. "We really don't see this deflator support - which is statistically impacting real GDP numbers - going away till the end of this fiscal year."

Economic activity as measured by gross value added (GVA) was estimated to have expanded 7.15%. Nominal GDP growth, which is not adjusted for price changes, likely slowed to 8.3% last quarter from 8.8% previously, the poll predicted. Those are based on a smaller sample of forecasters.

Meanwhile, recent cuts to the consumption tax, part of a major overhaul of the national goods and services tax (GST) system and implemented from September 22, are expected to give some support to demand in the coming quarters.

"Unfortunately, GST cuts have come at a time when Indian households are already heavily indebted. That takes away part of the disposable income they could otherwise have saved from the tax reductions," said Dhiraj Nim, economist at ANZ.

(Reporting by Pranoy Krishna and Vivek Mishra, Polling by Devayani Sathyan and Vijayalakshmi Srinivasan; Editing by Hari Kishan, Ross Finley and Andrew Heavens)