On 29 January 2026, the Government of India presented the Economic Survey 2025–26, a detailed review of the nation’s economic performance and a guiding document ahead of the Union Budget 2026. Prepared by Chief Economic Adviser V. Anantha Nageswaran, the Survey outlines India’s robust growth path, rising investment momentum, and areas that require attention as the country navigates a complex global landscape.
India’s Growth Leadership
The Economic Survey highlights that India is projected to grow at 7.4% in the current fiscal year (FY26), making it the fastest-growing major economy in the world for the fourth consecutive year. This remarkable performance, driven mainly by strong domestic demand and rising consumption, underscores the resilience of India’s economic engine even amid global uncertainty.
Private consumption has surged to 61.5% of GDP, the highest in over a decade, showing that households across urban and rural India are spending and supporting overall economic activity. Meanwhile, investment has picked up significantly. Gross Fixed Capital Formation (GFCF) reached around 30% of GDP, boosted by both public capital expenditure and a revival in private investment.
Macro Stability and Policy Successes
Inflation has moderated to a multi-year low of 1.7% during April–December 2025, primarily supported by disinflationary trends and improved supply-side conditions. On the fiscal front, the Survey highlights continued fiscal consolidation, with the fiscal deficit declining from 9.2% in FY21 to 4.8% in FY25, and the government remaining on track to achieve its FY26 target of 4.4% under the planned glide path.
Despite these strengths, the Survey acknowledges that external conditions remain uncertain. The Indian rupee has depreciated against the US dollar, largely driven by geopolitical volatility and shifts in global capital flows rather than domestic macroeconomic weaknesses. However, India’s external sector remains resilient, supported by robust reserves. The current account deficit stands at a comfortable 0.8% of GDP, while foreign exchange reserves provide an import cover of approximately 11 months, underscoring the country’s external stability.
Cities: Engines of Growth
A key theme highlighted in the Economic Survey is the growing significance of cities in India’s economic trajectory. Although official statistics still classify India as largely rural, economic activity particularly in output and services is increasingly urban-centric. Cities have emerged as hubs of productivity, innovation, and labour market depth, contributing a substantial share of national output. Projections indicate that by the next decade, urban areas will accommodate hundreds of millions of people and account for nearly 70% of GDP. Unemployment has declined to 4.9%, the labour force participation rate is rising, and formal employment is expanding. Poverty levels have shown a notable improvement, based on the World Bank’s updated poverty benchmarks. Extreme poverty is estimated at 5.3%, while lower-middle-income poverty stands at 23.9%, reflecting a gradual strengthening in income distribution and living standards.
The Survey also emphasizes the need to invest in urban infrastructure, including mass transit systems like Metro and Regional Rapid Transit Systems (RRTS), and to reimagine planning such that cities are productive, liveable, and inclusive.
Warnings and Risks Ahead
The Economic Survey doesn’t afraid away from cautioning about global risks. It points out that the world economy is entering a phase of heightened uncertainty where geopolitical tensions, trade pressure, and financial weaknesses can trigger sudden shocks. One of the standout warnings is the potential for AI-related financial stress, where highly leveraged investments in technology could in a worst-case scenario lead to downturns that rival past global crises. Other risks include volatility in capital flows, currency pressures due to structural import demands, and challenges in manufacturing competitiveness, all of which require policy precaution and resilience building.
Conclusion
India’s Economic Survey 2025–26 presents a balanced yet optimistic picture: India is maintaining strong growth, attracting investment, and strengthening macroeconomic fundamentals. But it also urges attentiveness against global uncertainty, structural blockages, and strategic weaknesses. As the nation heads toward the Union Budget 2026, these insights will play a central role in shaping policies that aim for inclusive and sustained economic progress.
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