Economic Survey 2026 highlights: Projects 6.8–7.2% growth for FY27, ‘Outlook remains favourable’ 

The central theme of the survey is the paradox of macroeconomic strength and external vulnerability with growth, inflation control and fiscal consolidation has put India on sturdy footing. The Economic Survey outlines three global scenarios for 2026. First, a baseline of managed disorder with continued volatility but no systemic collapse. Second, a disorderly multipolar breakdown marked by intensified geopolitical competition and financial stress. Thirdly, a low probability but high impact systemic shock, noted Rajeev Juneja said President, PHD Chamber of Commerce and Industry.

"Remarkably, across all the scenarios, India remains well positioned than its Asian peers as well as G7. This position is edified in the large domestic market, stable foreign reserves but vulnerabilities from capital flow disruptions remain, he added. On the fiscal policy front, the survey emphasizes consolidation of debt and capital expenditure. The Union Government has reduced its fiscal deficit to 4.8% of GDP and targets 4.4% in FY 2026. However, unconditional cash transfers at the state level pose risk of crowding out of private expenditure, said Juneja.

Forex reserves have more than doubled to $701.4 billion in FY26 from $341 billion in FY15, largely due to an increase in gold valuations and an improvement in the current account deficit, which narrowed from -1.32% in FY25 to -0.8% in FY26.

As a result, the external sector does not flash any warning signals as far as the overall macroeconomic picture is concerned.

DK Srivastava, Chief Policy Advisor of EY noted thatthe Economic Survey paints a picture of robust economic health for the Indian economy amidst continuing global uncertainties.

The Economic Survey sees India’s medium term real GDP growth potential at 7%. For FY27, the projected growth is in the range of 6.8-7.2%. This is predicated on a contribution of total factor productivity of 1.9% points.

The balance is to be contributed by growth in capital stock and that in labour which have respective shares of 0.49 and 0.51. As such the contributions of capital and labour to overall growth are estimated at 3.72% points and 1.33% points respectively. Thus, overall potential growth is largely driven by growth of capital stock. The only uncertainty relates to global economic headwinds which may continue for some time. However, India has strategized to mitigate the effect of this uncertainty by progressively enlarging its bilateral agreements with other large economies and country groups.

The general government fiscal deficit was 7.8% of GDP in FY25 (RE). This consists of GoI’s fiscal deficit and the consolidated fiscal deficit of states. As per the FY25 provisional actuals, GoI’s fiscal deficit was 4.8% of GDP and the consolidated states’ fiscal deficit was  2.8%. In FY26 (BE), GoI’s fiscal deficit is likely to fall to 4.4% of GDP. However, states’ fiscal deficit is budgeted to increase to 3.3% as they avail the interest free loans from the GoI. As per the Survey, the consolidated fiscal deficit is expected to come down to 7.2% of GDP in FY26 (BE). Going forward, GoI has to progressively bring down its fiscal deficit to GDP ratio to a level of 3%. States may also stabilize their fiscal deficit at 3% of GDP.

Thus, as more and more borrowing space is vacated by the government, the private corporate sector would find it easier to access available investible resources. The Survey argues that it may be better that for a period of 5 years or so, the strategy of fiscal consolidation may be changed ensuring an annual reduction in the GoI’s debt-GDP ratio. After global uncertainties are settled, it may be possible to return to a more conventional rule-based fiscal consolidation targets for fiscal deficit and debt in the context of their respective sustainable levels. At that time, the GoI’s Fiscal Responsibility and Budget Management (FRBM) may be recast accordingly.

"Growth holding up but risks are elevated" CEA V. Anantha Nageswaran said. He added that investor reluctance to commit to India warrants examination

Chief Economic Advisor V. Anantha Nageswaran addressing the press after Finance Minister Niramala Sitharaman tabled the Economic Survey 2026 in the Parliament today.

The value of the rupee, which has slipped to the 92 per dollar mark, does not accurately reflect India's stellar economic fundamentals, the Economic Survey said.

"In other words, the rupee, therefore, is punching below its weight," it said, adding investor reluctance to commit funds to India warrants examination at a time when inflation is under control and growth outlook is favourable. India depends on foreign capital flows to maintain a healthy balance of payments.

"The Indian rupee underperformed in 2025. India runs a trade deficit in goods. Its net trade surplus in services and remittances is not enough to offset it... When they run drier, rupee stability becomes a casualty," said the Economic Survey.

The rupee's valuation does not accurately reflect India's stellar economic fundamentals, it said.

"Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now. "However, it does cause investors to pause," the survey said.

Economy survey noted that, India is a global leader in low-cost vaccine supply, providing a majority of the world's diphtheria, tetanus and pertussis (DPT), Bacillus Calmette-Guerin (BCG) and measles vaccines. Moreover, India's medical devices sector is also rapidly becoming globally competitive, with exports to 187 countries in FY25.

The industry now manufactures high-end equipment, including MRI and CT scanners, linear accelerators, cardiac stents, and ventilators, it added.

This expansion into sophisticated imaging and life-support technologies marks a significant shift toward high-tech medical manufacturing, the Survey stated.

The Survey notes a sharp rise in global gold prices, reflecting heightened geopolitical and financial uncertainty. Gold prices climbed from $2,607 per ounce to over $ 4,315per ounce in 2025, signalling risk aversion, expectations of persistently negative real interest rates, and concerns over global tail risks. Rising gold prices are interpreted as a signal of expectations of lower or negative real returns globally.

The Economic Survey notedthat domestic steel sector faces challenges related to international price disparity and raw material security. The sector has undergone a major transformation in the last five years, largely driven by strong domestic demand from the construction and manufacturing sectors, it said. "However, the sector faces challenges related to international price disparity and raw material security. India was also a net importer of steel during FY26 (April–October), primarily due to low international prices, which resulted in lower margins on exports and cheaper imports," the survey stated.

India's civil aviation sector on sustained growth trajectory supported by conducive policy environment, infrastructure expansion.

The best-case scenario for the world in 2026 is ‘business as in 2025’, but one that becomes increasingly less secure and more fragile. In this setting, with the margin of safety being thinner, minor shocks can escalate into larger reverberations. Financial stress episodes, trade frictions, and geopolitical escalations do not lead to systemic collapse, but they do create volatility and require governments to intervene more actively to stabilise expectations. This scenario is less about continuity and more about managed disorder, with countries operating in a world that remains integrated yet increasingly distrustful. One could attach a subjective probability of around 40% to 45% to this scenario unfolding in 2026. Reflecting this is the Global Economic Policy Uncertainty Index2, which is near its worst readings of 2020, excluding the sharp spike in April 2025 at the introduction of the reciprocal tariffs. Fear lingers.

Economic survey highlights three scenarios pose a common risk for India-

Disruption of capital flows and the consequent impact on the rupee. Only the degree and the duration will vary.

In a world of geopolitical turbulence, this may not be confined to a year but could be a more enduring feature. In response, India needs to generate sufficient investor interest and export earnings in foreign currency to cover its rising import bill, as, regardless of the success of indigenisation efforts, rising imports will invariably accompany rising incomes. This has been the historical global experience.

Economic policy must focus on the stability of supply, the creation of resource buffers, and the diversification of routes and payment systems. 2026 may mark the point at which policy credibility, predictability and administrative discipline cease to be mere virtues and instead become strategic assets in their own right, with lasting relevance.

The appropriate stance for 2026 is therefore one of strategic sobriety rather than defensive pessimism. The external environment will require India to prioritise both domestic growth maximisation and shock absorption, with a greater emphasis on buffers, redundancy, and liquidity. Put differently, India must run a marathon and sprint simultaneously, or run a marathon as if it were a sprint.

As growth-driven import demand increases with greater global integration, India’s external sustainability depends on the quality and stability of its financing. The composition of capital inflows is key. FDI is the most stable source, supporting BoP stability, productivity, technology transfer, and export growth. Maintaining FDI amid a competitive global capital market requires improving the investment climate, deeper GVC integration, and coordinated policies across government levels.