The Economic Survey, tabled by Finance Minister Nirmala Sitharaman in Parliament on Friday, projects India’s real GDP growth in 2025-26 to be between 6.3% and 6.8%, considering both the upsides and downsides to growth. The Survey anticipates that the government’s focus on micro, small, and medium enterprises (MSMEs) and robust rabi crop production will drive growth and employment.
India’s economic prospects for FY26 appear balanced, with headwinds including elevated geopolitical and trade uncertainties and potential commodity price shocks. Domestically, the key drivers of growth will be the translation of private capital goods sector order books into sustained investment, improvements in consumer confidence, and corporate wage growth.
Rural demand, supported by a rebound in agricultural production, an expected easing of food inflation, and a stable macroeconomic environment, offers an upside to near-term growth. The Survey emphasizes that grassroots-level structural reforms and deregulation are essential to improve India’s global competitiveness and reinforce medium-term growth potential.
Inflation remains under control, paving the way for a stable growth path. The government’s proactive policy interventions, such as strengthening buffer stocks for essential food items, periodic open market releases, and easing imports during supply shortages, have been crucial in stabilizing inflation. Despite challenges, there are positive signs for inflation management in India.
For 2024-25, the Survey reports stable private consumption, reflecting steady domestic demand. Fiscal discipline and a strong external balance, supported by a services trade surplus and healthy remittance growth, contributed to macroeconomic stability. These factors provided a solid foundation for sustained growth amid external uncertainties.
The government’s focus on empowering citizens through education, healthcare, skill development, and social infrastructure development has shown significant progress. The Survey highlights the rising trend in government social services expenditure, which increased from 23.3% of total expenditure in FY21 to 26.2% in FY25 at a compound annual growth rate (CAGR). The social services outlay of the Centre and state governments grew from $148 billion in FY21 to $257 billion in FY25.
Chief Economic Advisor V. Anantha Nageswaran, in the Economic Survey, suggests that systematic deregulation under Ease of Doing Business 2.0 is crucial for catalyzing growth, innovation, and competitiveness. Deregulation can encourage innovation and help India’s SME sector, known as the Mittelstand, to weather economic shocks, realize manufacturing aspirations, attract long-term investments, and promote sustainable and employment-sensitive growth.
The Economic Survey 2025 underscores the importance of climate adaptation for India due to its high vulnerability to climate change. Developing countries like India bear a disproportionate burden of climate change and must face the consequences of historical emissions. Consequently, India needs to prioritize climate adaptation urgently.
India stands at a critical juncture as it prepares for the Union Budget 2025-26. A balanced and forward-thinking budget will be essential for driving sustainable economic growth and positioning India as a leader in global competitiveness and climate resilience.
