Economic Survey 2025-26: Why India’s Growth Story Remains Steady Even as the World Wobbles

At a time when global economic signals are mixed, markets are volatile, and geopolitics continues to shape trade and capital flows, India’s economic story is entering a phase of quiet resilience rather than dramatic acceleration. The message from the Economic Survey 2025-26 is clear: the country is not immune to global uncertainty, but it is far better prepared to navigate it.

Economic Survey 2025-26

Tabled in the Lok Sabha by Union Finance Minister Nirmala Sitharaman, the Survey lays out a nuanced picture of India’s macroeconomic outlook ahead of the Union Budget. Prepared by the Economic Division of the Department of Economic Affairs under the guidance of the Chief Economic Adviser, the document balances realism with optimism—acknowledging near-term moderation while reinforcing confidence in India’s medium-term growth potential.

The Survey projects India’s GDP growth at 6.8–7.2 per cent in FY27, a shade lower than the 7.4 per cent estimated for FY26. This marginal cooling, it notes, is not a sign of weakness but a natural adjustment as the economy transitions amid global headwinds and domestic structural shifts. Importantly, it underlines that a series of reforms undertaken over recent years have lifted India’s underlying growth capacity closer to the 7 per cent mark.

As the Survey succinctly puts it, the outlook calls for “caution but not pessimism”.

Domestic Demand: India’s Strongest Safety Net

One of the strongest takeaways from the Economic Survey is the continued dominance of domestic growth drivers. Consumption and investment remain resilient, supported by macroeconomic stability, controlled inflation, and sustained public capital expenditure.

The government’s capital spending push continues to play a catalytic role, crowding in private investment and anchoring growth even as external demand faces pressure. With inflation broadly under control and financial conditions stable, the Survey describes the balance of risks to growth as “broadly even”.

In a world marked by geopolitical tensions, slowing growth in advanced economies, and unpredictable capital flows, the Survey makes a strong case for prioritising domestic growth levers. It stresses the need for strong buffers, adequate liquidity, and deeper institutional capacity to absorb external shocks—an approach that positions internal demand as India’s primary economic stabiliser.

Reforms and Manufacturing: Turning Uncertainty into Opportunity

The Survey credits ongoing structural reforms for helping India convert global uncertainty into opportunity. Measures such as the GST rejig and broader policy reforms have strengthened the economy’s ability to adjust to systemic changes. FY27, it says, will be a “year of adjustment”, as these reforms begin to show deeper impact across sectors.

On the external front, the Survey highlights the growing strategic importance of Free Trade Agreements (FTAs), especially with Europe. These agreements, if effectively leveraged, could enhance India’s manufacturing competitiveness, strengthen export resilience, and deepen strategic economic ties.

However, the document is clear-eyed about the challenges ahead. Real gains from trade agreements will depend on India’s ability to produce competitively at scale. Productivity improvements, supply-side reforms, and efficient manufacturing ecosystems are critical if India is to translate trade diplomacy into sustained export growth.

Rupee, Capital Flows, and Market Valuations

The Economic Survey also turns the spotlight on currency movements and capital flows. It notes that the rupee’s current valuation does not fully reflect India’s economic fundamentals, pointing instead to global factors and a slowdown in foreign capital inflows during 2025 as key drivers of recent underperformance.

At the same time, the Survey issues a cautionary note on financial markets. It warns that overly optimistic asset valuations—particularly those driven by expectations from the AI-led boom—could face corrections if anticipated productivity gains fail to materialise. The message is subtle but important: long-term value creation must be backed by real economic outcomes, not just narrative-driven optimism.

India–US Trade Talks: A Potential Confidence Booster

On the trade diplomacy front, the Survey indicates that ongoing negotiations for a trade agreement with the United States are expected to conclude during 2026. A successful conclusion could help reduce uncertainty on the external front and provide greater clarity for exporters and investors.

While global conditions continue to pose challenges—ranging from slower growth in key trading partners to tariff-related disruptions and volatile capital flows—the Survey emphasises that these translate more into external uncertainties rather than immediate macroeconomic stress for India.

The expectation is that progress on the US trade front could act as a stabilising signal, especially at a time when global trade dynamics remain in flux.

Building System-Level Capacity for the Long Run

Looking beyond short-term cycles, the Economic Survey places strong emphasis on system-level institutional capacity. As India’s economic stature rises globally, the Survey argues that sustained high growth will depend not only on capital formation and reforms, but also on governance quality, financial resilience, and the ability to adapt to rapid technological change.

Geopolitical considerations, it notes, will increasingly intersect with economic policymaking. Preparing institutions to operate effectively in this complex environment will be key to sustaining near-7 per cent growth over the long term.

Taken together, the Economic Survey 2025-26 positions India as one of the fastest-growing major economies, navigating a challenging global landscape with stable fundamentals and a strong domestic engine. While the near-term growth trajectory shows moderation, the medium-term narrative remains intact—rooted in reforms, competitive manufacturing, domestic demand, and institutional strength.

The message is not of unchecked exuberance, but of confident steadiness: India’s growth story continues, shaped less by global noise and more by its own economic choices.