India’s GDP growth cools to 7.2% in Q3FY26 amid softer services: ICRA

India’s economic growth is expected to moderate in the third quarter of FY2025-26, with rating agency ICRA projecting year-on-year (YoY) GDP growth at 7.2 per cent, down from 8.2 per cent in Q2, amid signs of easing momentum in services and agriculture.

According to ICRA, the slowdown in services and farm output is likely to outweigh an improvement in industrial performance during the October–December quarter.

Services sector growth is estimated to have slowed to 7.8 per cent in Q3FY26 from 9.2 per cent in the preceding quarter. Agriculture growth is also seen easing to 3.0 per cent from 3.5 per cent in Q2. In contrast, industrial growth is projected to rise to a six-quarter high of 8.3 per cent, up from 7.7 per cent in Q2.

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Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA, said estimating GDP growth under the new base year remains challenging. “We have anchored the outlook for Q3 to the existing GDP dataset across sectors. Based on this, we project GDP growth to have eased to 7.2 per cent in Q3 2025-26 from 8.0 per cent in the first half of the fiscal,” she said.

Nayar attributed the sequential moderation partly to an unfavourable base effect and a contraction in some segments, which have tempered the overall growth trajectory despite improved industrial output.

On the external front, the pace of services exports growth also cooled. The YoY expansion in India’s services exports slipped to a seven-quarter low of 7.5 per cent in Q3FY26, amounting to $111.2 billion, compared with 8.7 per cent in Q2, when exports stood at $101.6 billion. The moderation was largely attributed to an unfavourable base effect.

The projected slowdown suggests that while industrial activity is showing resilience, broader economic momentum may be losing some steam as the fiscal year progresses. The Q3 print will be closely tracked for cues on whether domestic demand and external trade can regain traction in the final quarter of FY26.