Overall Economic Outlook
- The Economic Survey 2025–26 raises India’s medium-term growth potential to 7% from 6.5%.
- Growth upgrade reflects capital formation, higher labour participation, and improved factor efficiency.
- FY26 government growth estimate stands at 7.4%, with Q3 nowcast at 7%.
- FY27 projected growth range placed between 6.8% and 7.2%.
- Survey authored by Chief Economic Adviser V. Anantha Nageswaran and tabled in Parliament.
Reform Momentum and Growth Enablers
- Growth potential linked to PLI schemes, FDI liberalisation, and logistics reforms.
- Public investment strengthened physical and digital infrastructure across regions.
- Simplification of tax laws improved business compliance and corporate balance sheets.
- MSME credit easing improved formalisation of employment and financial sector stability.
- Tax administration reforms enhanced revenue efficiency and transparency.
Global Economic Risk Scenarios
- Survey outlines three probabilistic global scenarios for 2026, each posing India-specific risks.
- Worst-case scenario assigned 10%–20% probability, exceeding the 2008 crisis in severity.
- Risks stem from systemic financial, technological, and geopolitical stress interactions.
- Emerging vulnerability identified in highly leveraged AI-driven investment models.
- Concerns include optimistic timelines, narrow customer concentration, and long capital commitments.
- Potential spillover could tighten global liquidity and weaken capital markets.
- Best-case scenario assigned 40%–45% probability, reflecting fragile continuity of 2025 conditions.
- Third scenario predicts disorderly multipolar breakdown, escalating strategic rivalries globally.
- Survey warns of asymmetric macroeconomic consequences even under lower-probability outcomes.
Risks to India’s External Stability
- Common risk across scenarios is disruption of capital flows affecting the rupee.
- Impact expected to be enduring rather than short-term volatility.
- India must attract foreign currency earnings through exports and investor confidence.
- Rising incomes will invariably increase import demand, despite indigenisation efforts.
- Survey stresses importance of macroeconomic buffers and investor trust.
Fiscal Concerns and Cash Transfer Policies
- Survey raises caution over unconditional cash transfers (UCTs), particularly women-focused schemes.
- Aggregate UCT spending estimated at ₹1.7 lakh crore in FY26.
- Number of States implementing UCTs increased over five-fold since 2022–23.
- Around half of implementing States remain in revenue deficit.
- Transfers amount to 0.19%-1.25% of State GDPs and 0.68%–8.26% of budgets.
- Survey highlights fiscal sustainability and medium-term growth trade-offs.
- Lack of sunset clauses and periodic reviews increases rigidity in revenue expenditure.
- Rising transfers crowd out productive capital expenditure during fiscal stress.
- Political context noted, with four poll-bound States influencing fiscal choices.
Labour Markets and Gig Economy Trends
- PLFS data indicates falling unemployment and rising labour participation.
- Gig workforce expanded from 77 lakh in 2020–21 to 1.2 crore in 2024–25.
- Growth driven by platform-based delivery, ride-sharing, and freelancing ecosystems.
- Survey flags income volatility and thin-file credit access for gig workers.
- Around 40% of gig workers earn below ₹15,000 monthly.
- Platform algorithms control work allocation, wages, performance monitoring, and demand matching.
- Risks include algorithmic bias, burnout, and financial exclusion.
- Labour Codes expected to support formalisation and security for women and platform workers.
Rural Economy and Employment Policy Reset
- Survey supports scrapping MGNREGA, citing deep structural inefficiencies.
- New law introduced as Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Act, 2025.
- NABARD’s Rural Economic Conditions and Sentiments Survey (RECSS) indicates stronger rural consumption and income growth.
- Rural unemployment declined from 3.3% in 2020–21 to 2.5% in 2023–24.
- MGNREGA person-days dropped 53% from pandemic peak to 183.77 crore in FY26.
- Issues cited include digital attendance bypassing, machine use, and misappropriation.
- Women’s participation rose to 58.1% in 2024–25.
- Survey notes limited households completing 100 days of work post-pandemic.
Education and Human Capital Development
- Only 17% of rural schools and 38% of urban schools provide secondary education.
- Secondary age-specific Net Enrolment Ratio remains low at 52.2%.
- Nearly two crore adolescents aged 14–18 remain out of school.
- Leading dropout reason is household income supplementation at 44%.
- Girls cite domestic and care responsibilities as primary constraints.
- Only 0.97% adolescents received institutional skilling, with 91.94% receiving none.
- Survey emphasises internationalisation of higher education.
- Over 81% of higher education enrolments occur in State institutions.
- Introduction of Viksit Bharat Shiksha Adhishthan Bill, 2025, to streamline regulation.
- India hosts 23 IITs, 21 IIMs, and 20 AIIMS, including campuses abroad.
Manufacturing and MSME Strategy
- Manufacturing framed as a strategic national asset beyond incentive-based models.
- MSMEs contribute 35.4% of manufacturing output and 48.58% of exports.
- Sector employs over 32.82 crore persons across 7.47 crore enterprises.
- Survey calls for shift from import substitution to scale and innovation.
- Emphasis placed on global value chain integration and competitiveness.
Financial Sector Performance and Regulation
- Regulators advised to balance capital openness and insulation from global shocks.
- GNPA ratio of banks fell to 2.2% by September 2025.
- Net NPA ratio declined to 0.5%, reaching record low levels.
- Credit growth rose to 14.5% year-on-year by December 2025.
- Demat accounts increased by 2.35 crore, crossing 21.6 crore total accounts.
- Unique investors crossed 12 crore, with nearly 25% women participation.
- Mutual fund investors reached 5.9 crore, mostly from non-metro regions.
- SEBI praised for regulatory modernisation and investor protection efforts.
Energy Security and Agriculture
- Crude oil import sources diversified across U.S., Egypt, Libya, Nigeria, and UAE.
- U.S. share rose to 8.1%, while UAE increased to 11.1%.
- Agricultural growth averaged 4.4% over five years, but slowed to 3.5% in Q2 FY26.
- Livestock and fisheries led growth at 7.1% and 8.8% respectively.
- Foodgrain output reached 3,577.3 lakh tonnes in 2024–25.
Climate, Health, and Urban Governance
- Survey prioritises adaptation over near-term emission mitigation.
- States that development itself strengthens climate resilience.
- Flags rising digital addiction and screen-related mental health risks.
- Recommends Tele-MANAS expansion and cyber-safety education.
- Maternal mortality reduced by 86% since 1990.
- Under-five mortality declined 78%, and infant mortality fell to 25 per 1,000 births.
- Urban challenges include fragmented governance and limited fiscal autonomy.
- Cities urged to improve civic norms, shared responsibility, and people-centric planning.
Conclusion
- The Survey presents India as structurally resilient amid rising global fragility.
- Growth potential hinges on reforms, investor confidence, and capital flow stability.
- Balancing fiscal prudence, human capital development, and strategic autonomy remains critical.
- India’s policy challenge lies in transforming demographic advantage into sustainable economic leadership.