ECONOMIC SURVEY 2025-26: HIGHLIGHTS, ASSESSMENT, OUTLOOK

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Picture Courtesy:  PIB

Context

The Economic Survey 2025-26 presents a comprehensive analysis of the Indian economy, highlighting  robust growth and strong macroeconomic fundamentals amidst global challenges.  

Highlights of the Economic Survey 2025-26

Robust GDP Growth

Real GDP is projected to grow by 7.4% in FY26, with a medium-term growth potential revised upwards to around 7%. The forecast for FY27 is pegged between 6.8% and 7.2%, driven by strong domestic demand.  

Benign Inflation

The average headline CPI inflation dropped to a historic low of 1.7% between April and December 2025, one of the sharpest declines among major emerging economies.

Broad-Based Recovery

The economic expansion is well-distributed across all sectors, with agriculture providing a stable base, manufacturing gaining momentum, and services continuing to be the primary engine of growth.

Core Engines of Indian Growth

The survey highlights a multi-sectoral growth strategy, with strong performance across the primary, secondary, and tertiary sectors.

Agriculture: The Pillar of Stability

Steady Growth

Agriculture and allied activities sector is estimated to grow by 3.1% in FY26. Allied sectors like livestock and fisheries are showing stable growth of around 5-6%, enhancing resilience against climatic shocks.

Income Support & Rural Demand

Government schemes focused on income support and productivity enhancement have been crucial in bolstering rural demand and stabilizing the economy.

Case Study - PM-KISAN: The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme gives farmer families ₹6,000 yearly for direct income support, boosting their liquidity for agricultural investment and stabilizing rural consumption.

Manufacturing: Gaining Momentum

The industrial sector, led by manufacturing, is emerging as a powerful growth engine, indicating a structural economic recovery.

Accelerated Growth: Manufacturing Gross Value Added (GVA) growth accelerated to 9.13% in the second quarter of FY26.

Policy Catalyst - PLI Scheme: The Production Linked Incentive (PLI) schemes across 14 key sectors have been a game-changer.

Case Study - Mobile Phone Manufacturing: The PLI scheme has transformed India from a net importer into a major exporter of mobile phones. 

• Top global firms like Apple and Samsung have scaled up manufacturing in India, leading to a surge in mobile phone exports to ₹1.2 lakh crores in FY24 (Source: India Cellular and Electronics Association).

Services Sector: The Dominant Growth Engine

Dominant GVA Share: The sector's share in India's GVA reached a historic high of 56.4%.

Export Powerhouse: India is now the world’s 7th largest services exporter, with its share in global services trade reached 4.3% in 2024. 

• Services exports reached an all-time high of USD 387.5 billion in FY25.

Case Study - Global Capability Centers (GCCs): India has become the world's largest hub for GCCs, with over 1,700 centers employing more than 19 lakh professionals. 

• These have evolved from back-offices to high-value hubs for R&D and digital innovation, contributing an estimated $68 billion to India's GVA.

Macroeconomic Stability 

High growth is being supported by strong and stable macroeconomic fundamentals, achieved through a coordinated policy framework.

Prudent Fiscal Policy

Fiscal Consolidation: Fiscal deficit projected to decline to 4.4% of GDP in FY26. This has strengthened India's fiscal credibility, leading to sovereign rating upgrades.

Quality of Expenditure: Shift towards growth-enhancing capital expenditure (Capex), which rose to 4% of GDP in FY25. This boosts private investment through a "crowding-in" effect.

N.K. Singh Committee: The fiscal strategy aligns with the FRBM Review Committee's recommendations, which advocated for a stable debt-to-GDP ratio as a primary fiscal anchor.

Supportive Monetary Policy

Accommodative Stance: The RBI's Monetary Policy Committee (MPC) has balanced inflation control with growth support, reducing the repo rate to 5.25% by December 2025.

Healthy Banking Sector: Supported by policy measures, bank credit growth stood at a healthy 14.5% in December 2025, and the banking sector is robust, with Gross NPAs at multi-decadal lows and a high Capital Adequacy Ratio of 17.2% as of September 2025.

Resilient External Sector

Strong Forex Reserves: Foreign exchange reserves stood at a comfortable USD 701.4 billion as of January 2026, providing an import cover of around 11 months.

Trade Diversification: India has diversified its trade partnerships, ranking third among Global South countries in trade diversity, which reduces dependency on any single market (Source: UNCTAD, 2025).

Highest Remittance Recipient: India remains the world's largest recipient of remittances, with inflows reaching USD 135.4 billion in FY25, providing a stable source of foreign exchange and supporting the current account.

Key Structural Transformations

The Survey highlights deep-seated changes enhancing the economy's long-term potential.

Case Study - Pradhan Mantri Jan Dhan Yojana (PMJDY): A World Bank study highlighted its role in increasing bank account ownership among women by 26% and enabling effective Direct Benefit Transfers (DBT), thus strengthening both inclusion and state capacity.

Challenges and Potential Headwinds

Global Uncertainties: Risks from geopolitical conflicts, global trade fragmentation, and financial market volatility remain key concerns.

Domestic Risks: Key domestic challenges include ensuring the quality of employment, addressing financial pressures on state governments, and mitigating the impacts of climate change on agriculture.

Manufacturing Competitiveness: To sustain manufacturing growth, India needs to address issues like upstream protectionism that can impact the competitiveness of MSMEs in global value chains.

Way Forward

The Economic Survey 2025-26 concludes that the Indian economy is on a firm footing, marked by resilience and momentum. 

The path forward involves leveraging the stability to accelerate structural reforms and realize the goal of becoming a developed economy by 2047.

• Enhance agricultural productivity through technology and diversification.
• Deepen manufacturing competitiveness via skill development and 'Make in India'.
• Expand high-value services exports by tapping into the potential of GCCs and digital services.
• Continue public investment in infrastructure to create a world-class logistics network.
• Focus on inclusive growth by empowering women and youth to participate in the growth story.

Source: PIB