Why This Economic Survey Matters
Every year, just before the Union Budget, the Government of India releases the Economic Survey—a document that goes beyond numbers to explain how and why the economy is moving in a particular direction. The Economic Survey 2025–26, tabled in Parliament by Finance Minister Nirmala Sitharaman, comes at a time when the global economic order is undergoing deep structural stress. Prepared by the Economic Division of the Department of Economic Affairs under the Ministry of Finance, the Economic Survey is guided by the Chief Economic Adviser and approved by the Finance Minister. The Survey evaluates economic developments during the ongoing financial year (April 2025–March 2026), while the forthcoming Budget outlines fiscal plans for the subsequent year, 2026–27. Although its recommendations are not legally binding on the government, they play a crucial advisory role in shaping policy discourse and fiscal strategy.
Trade wars, geopolitical conflicts, technology restrictions, and the weaponization of finance have reshaped global economic governance. Against this backdrop, the Survey positions India as an economy that has managed relative stability and resilience amid global turbulence.
Evolution and Structure of the Economic Survey
India’s first Economic Survey was presented in 1950–51 and, until 1964, it was released alongside the Union Budget. Over time, its format evolved—from a single-volume document to a two-volume structure post-2010, and later reverting to a single-volume format under the leadership of the current Chief Economic Adviser. This restructuring reflects an effort to present a more integrated and policy-oriented assessment.
The Economic Survey 2025–26 is organised into sixteen thematic chapters covering the state of the economy, fiscal developments, monetary management, financial intermediation, inflation, agriculture, industry, services, external sector, environment, education, health, employment, and skill development. The front cover symbolically emphasises exports, manufacturing, and trade, signalling the Survey’s central theme: strengthening India’s position in global trade through manufacturing expansion and export competitiveness.
Global Economic Environment and India’s Resilience
The Survey highlights significant global policy uncertainty, driven by intensifying geopolitical conflicts, the weaponisation of trade, finance, and energy, and rising protectionism—particularly in the context of renewed tariff-based trade policies. Global uncertainty, which had spiked during the 2008 financial crisis, has reached even higher levels in 2024–25 due to geopolitical tensions and strategic technology restrictions. Despite these adverse global conditions, the Survey underscores India’s relative macroeconomic resilience. Compared to major economies such as the United States, the United Kingdom, and China—which are grappling with high fiscal and primary deficits—India has maintained comparatively stable fiscal indicators. Alongside Brazil, India stands out for containing its primary deficit within manageable limits.
Growth Outlook and Demand-Side Drivers
The Economic Survey projects India’s real GDP growth for 2026–27 in the range of 6.8% to 7.2%, while growth for the current year (2025–26) is estimated at 7.4%, exceeding earlier projections. This robust performance is largely attributed to strong private consumption and a recovery in investment activity.
From a demand-side perspective, the Survey reiterates the GDP identity—private consumption, private investment, government expenditure, and net exports—as key growth drivers. Data indicate sustained growth in private consumption since 2015–16, while investment growth, after a temporary slowdown post-2022–23, has regained momentum. On the supply side, Gross Value Added (GVA), which reflects sectoral production across agriculture, industry, and services, is estimated to grow at approximately 7.3% during 2025–26, reinforcing the broad-based nature of economic expansion.
Fiscal Consolidation and Revenue Performance
Fiscal consolidation remains a central achievement highlighted in the Survey. Following the sharp deterioration in fiscal balances during the COVID-19 pandemic—when the fiscal deficit peaked at 9.2% of GDP in 2020–21—the government has steadily reduced the deficit to 4.4% of GDP in 2025–26. The primary deficit has been compressed to 0.8%, reflecting prudent expenditure management.
This fiscal discipline has contributed to improved sovereign credit ratings. Notably, after nearly two decades, Standard & Poor’s upgraded India’s sovereign rating from BBB– to BBB, citing sustained fiscal consolidation as a key factor. The Survey also reports a significant improvement in revenue buoyancy. The composition of tax revenues has shifted in favour of direct taxes, reducing the regressive burden of indirect taxation. The share of direct taxes in total tax revenue has increased from 52% (pre-pandemic) to 59%, while indirect taxes have declined to 41%.
Additionally, income tax compliance has improved markedly, with the number of income tax returns rising from 6.9 crore in 2021–22 to 9.2 crore, indicating greater formalisation of the economy.
Monetary Management and Financial Sector Health
The chapter on monetary management evaluates the effectiveness of the Reserve Bank of India’s policy transmission. The Survey finds that changes in the policy repo rate have been effectively transmitted to bank lending rates, improving monetary policy efficiency.
Banking sector health has improved significantly, with Gross Non-Performing Assets declining from over 11% in 2016–17 to 2.2%, enabling banks to expand credit, particularly to MSMEs. Pension coverage has expanded rapidly under schemes such as the Atal Pension Yojana and the National Pension System, enhancing long-term financial security. Insurance penetration has also increased, with life insurance premiums rising from ₹6.3 lakh crore (2020–21) to ₹8.9 lakh crore, and non-life insurance premiums growing from ₹2 lakh crore to ₹3.1 lakh crore, supporting the objective of “Insurance for All.”
Capital Markets, Microcredit, and Financial Inclusion
India’s capital markets have witnessed remarkable growth, particularly in the primary market. IPO activity has surged, reflecting investor confidence and corporate expansion. Simultaneously, microcredit initiatives under the Pradhan Mantri Mudra Yojana have disbursed over ₹36 lakh crore across 55 crore loan accounts, with women accounting for nearly 69% of beneficiaries—highlighting inclusive financial deepening.
External Sector Performance and Trade Dynamics
Despite global trade disruptions, India’s trade performance has been relatively stable. Imports increased by 5.9%, while exports grew by 2.4%, leading to a trade deficit of $28 billion. However, services exports performed strongly, creating a surplus of $151 billion, offsetting the goods trade deficit. India has signed FTAs and CEPAs with eight countries in the last five years and is negotiating several more. The current account deficit declined from 1.3% of GDP to 0.8% in 2025–26 (H1). While global trade growth has slowed due to geopolitical tensions, India’s external sector performance has remained relatively stable. Merchandise trade continues to record a deficit, which widened to USD 28 billion, but this is substantially offset by strong services exports. Forex reserves have more than doubled over the past decade, crossing $700 billion. External debt has declined to 19.2% of GDP, and import cover stands at 11 months.
Services exports grew by over 12%, generating a surplus of USD 151 billion, driven primarily by IT and software services. Consequently, the current account deficit declined from 1.3% of GDP to 0.8%, indicating improved external sustainability. The Survey also notes India’s expanding network of Free Trade Agreements and Comprehensive Economic Partnership Agreements, including recent agreements with the European Union, UAE, Australia, and the UK, alongside ongoing negotiations with the US and ASEAN partners.
Inflation Trends and Price Stability
India recorded one of the lowest inflation rates globally during 2025–26. Headline inflation averaged 1.3%, while core inflation stood at 4.6%, influenced largely by rising precious metal prices. Food inflation turned negative due to lower prices of vegetables and pulses, aided by timely government interventions and improved supply management.
The Survey cautions that inflation may rise moderately in 2026–27 due to currency depreciation and import costs, but maintains that macroeconomic fundamentals remain strong enough to manage such pressures.
Agriculture and Structural Support
Agricultural growth remained stable, with notable gains in livestock (6.1%) and fisheries and aquaculture (7.2%). Crop sector growth hovered around 4%, consistent with structural constraints such as limited arable land. Government initiatives—including MSP, PM-KISAN, crop insurance, irrigation, and soil health programs—continue to support farm incomes and productivity.
Concluding Geo-Economic Insight
The Economic Survey 2025–26 presents India as an economy that is not immune to global shocks but better prepared to absorb them. Fiscal discipline, domestic demand strength, financial sector stability, and services-led external resilience form the backbone of this preparedness. The Survey underscores the importance of sustaining reforms in manufacturing, trade, digital infrastructure, and human capital to maintain long-term growth and macroeconomic stability.
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