The Economic Survey 2025–26, tabled in Parliament by Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman, projects India’s GDP growth at 7.4 percent for FY26, driven by the strong twin engines of consumption and investment. The Survey reaffirms India’s position as the fastest-growing major economy for the fourth consecutive year, supported by macroeconomic stability, easing inflation, strong fiscal management, and resilient domestic demand.
Growth Outlook: Strong Momentum Continues
The Survey projects real GDP growth for FY27 in the range of 6.8–7.2 percent, with India’s potential growth estimated at around 7 percent. Despite a challenging global environment, domestic drivers remain robust, supported by improving balance sheets of households, firms, and banks.
Consumption Emerges as the Main Growth Driver
Domestic demand continues to underpin economic expansion.
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Private Final Consumption Expenditure (PFCE) rose to 61.5% of GDP in FY26.
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This reflects low inflation, stable employment, rising real incomes, and strong rural demand supported by agriculture.
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Urban consumption has also strengthened, aided by tax rationalisation and improved purchasing power.
Investment Strengthens Economic Foundation
Investment remains the second pillar of growth.
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Gross Fixed Capital Formation (GFCF) stands at 30% of GDP in FY26.
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GFCF expanded by 7.6% in the first half of FY26, exceeding both last year’s pace and the pre-pandemic average.
This indicates improving business confidence and stronger capital formation across sectors.
Agriculture Shows Resilience, Allied Sectors Provide Stability
The Survey estimates agriculture and allied sectors growth at 3.1% in FY26.
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Agricultural GVA grew 3.6% in H1 FY26, supported by a favourable monsoon.
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Allied activities such as livestock and fisheries continue to grow steadily at 5–6%, helping stabilise overall farm sector performance.
Industry Gains Momentum, Manufacturing Leads
The industrial sector is showing renewed strength:
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Manufacturing grew by 8.4% in H1 FY26, exceeding the full-year estimate of 7%.
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Industrial growth for FY26 is projected at 6.2%, up from 5.9% in FY25.
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High-frequency indicators such as PMI, IIP manufacturing, e-way bills, steel consumption and cement production point to sustained momentum.
The Survey notes that GST rationalisation and improving demand outlook will further support industrial growth.
Services Continue to Drive Economic Expansion
On the supply side, services remain the main engine of growth.
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Services GVA grew by 9.3% in the first half of FY26.
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Full-year services growth is estimated at 9.1%, reflecting broad-based expansion across sub-sectors.
Inflation Moderates, Supporting Real Incomes
Inflation has eased significantly in FY26:
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Headline CPI inflation declined to 1.7% (April–December FY26).
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The decline was driven largely by lower food prices, especially vegetables and pulses.
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Underlying inflation pressures appear contained, providing room for supportive monetary policy.
Strong Fiscal Discipline and Improved Financial Stability
The Survey highlights prudent fiscal management:
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Direct taxes reached nearly 53% of the annual target by November 2025.
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GST collections recorded multiple all-time highs.
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Capital expenditure reached nearly 60% of budgeted allocation by November.
India’s credibility has been recognised globally:
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S&P upgraded India’s sovereign rating to ‘BBB’.
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CareEdge Global assigned India a ‘BBB+’ rating.
Banking Sector Health Improves Sharply
The financial sector has strengthened significantly:
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Gross NPA ratio declined to a multi-decade low of 2.2%.
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Profitability has improved, supported by stronger balance sheets.
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Lending rates have softened following repo rate cuts and liquidity support measures.
Exports Reach Record Levels; External Sector Remains Comfortable
India’s total exports (merchandise + services) reached a record USD 825.3 billion in FY25, with momentum continuing in FY26.
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Services exports grew 6.5% (April–December 2025).
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Current account deficit remains moderate at 0.8% of GDP in H1 FY26.
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Forex reserves cover over 11 months of imports, providing a strong buffer.
The Survey also notes the strategic importance of trade agreements, including the concluded Free Trade Agreement with the European Union after three years of negotiations, alongside FTAs with the UK, Oman and New Zealand.
Structural Reforms Strengthen Medium-Term Growth
Key reforms highlighted include:
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Implementation of four Labour Codes
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GST rationalisation
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Deregulation and compliance simplification
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Continued focus on public capital expenditure
The cumulative impact of reforms has lifted India’s medium-term growth potential closer to 7 percent.
Conclusion: Economic Survey 2025–26
The Economic Survey 2025–26 presents a picture of a resilient and structurally strengthening Indian economy. With strong domestic demand, improving investment climate, healthier financial institutions, and continued reform momentum, India is well-positioned to sustain high growth despite global uncertainties. The outlook remains one of cautious optimism, anchored in macroeconomic stability and long-term policy credibility.
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Source: PIB
