By Soumya Kanti Ghosh, Member 16th Finance Commission, Member, PM Economic Advisory Council, and Group Chief Economic Advisor, State Bank of India
The Economic Survey for 2025-26 comes against a backdrop of the US making an all-out wager to attain global supremacy amidst the crumbling pillars of globalisation, and a rekindled strategic positioning that boosts the defence of critical minerals to chart new trade ways even as the rules-based order essentially stares at an untimely obituary. In such tectonic upheavals, asset classes are spiralling, and the bruised tenets of economics are wobbling with a fractured neo-geo-real politicism (a fragmented new world order, and the realpolitik behind its curtains) as a tilt towards real assets trumps virtual ones.
Subsequently, the Survey points to a future that may look like the yesteryears but more fragile and less secure. This calls for greater hyper-vigilance and more pragmatic policies that ensure stability of supply and creation of optimal resource buffers.
The Economic Survey spans 739 pages, divided into 16 chapters. It covers almost all areas of interest ranging from agriculture to artificial intelligence (AI), industry to import substitution, and services to skill development.
This time, the report breaks with precedent and arranges chapters based on national priorities, with three special essays on topics of medium- to long-term interest on AI, the challenges for quality of life in Indian cities, and the roles of state capacity and the private sector (including households) in achieving strategic resilience and strategic indispensability.
The Survey has estimated a potential GDP growth of 7% for India and given the outlook on GDP growth for FY27 at 6.8-7.2%, the output gap will be non-inflationary. Other macroeconomic parameters such as fiscal deficit, current account deficit, and foreign exchange reserves show a high level of confidence and stability. India has reduced its general government debt-to-GDP ratio by about 7.1 percentage points since 2020, while it remains the highest recipient of remittances (at $135.4 billion in FY25).
The Survey notes many milestones in the economic journey in FY25, a notable one among them being a historic first profit after tax of `2,701 crore for distribution companies, marking a decisive turn in financials of the beleaguered sector.
In particular, the Survey mentions that the government’s prudent fiscal management has strengthened credibility and reinforced confidence in India’s macroeconomic and fiscal framework. This is reflected in low deficit/debt, rating upgrade(s), vigorous revenue receipts, and higher capital expenditure. India’s capex has increased nearly 4.2 times, from `2.63 lakh crore in FY18 to `11.21 lakh crore in FY26 (Budget estimates), while effective capital expenditure in FY26 (BE) is `15.48 lakh crore, positioning infrastructure as a key growth driver.
Railway infrastructure has continued to expand, the domestic aviation market is the world’s third largest now with an increasing number of airports, and power sector capacity expansion has sustained with nil demand-supply gap. Today, India’s renewable energy (RE) constitutes 49.83% of total power generation capacity, with the country ranking third globally in overall RE and installed solar capacity.
The Survey highlights the financialisation of savings in the form of increasing participation in capital markets. A key milestone was the crossing of the 12-crore mark for unique investors in September 2025, with nearly a quarter of them being women. The mutual fund industry has also expanded and spread its wings from metro to urban areas.
While urbanisation is the new trait of India’s demography, the task now is to make it work better for citizens in tangible as well as intangible ways. The Survey has opined that urbanisation can be turned into a visible source of opportunity with proper planning, finance, and governance.
The Survey has been candid in highlighting critical macroeconomic adjustments that are needed going forward, stressing that manufacturing competitiveness and exports are important to maintain long-term currency stability and strength. Drawing lessons from experiences in Britain, it has emphasised sequencing, system readiness, and finance reforms to deliver a green, competitive growth path without compromising on energy security or development objectives.
In terms of theme-based analysis, this year’s Survey has focused on AI and notes that India’s demand for the technology is emerging from real-world problems rather than speculative frontier uses. There is a growing appetite for AI systems that work on local hardware and operate in low-resource settings.
On long-term policy prescriptions, the Survey proposes policy that moves away from import substitution to strategic resilience and strategic indispensability. It recommends that Swadeshi must be a disciplined strategy, as not all import substitution is either feasible, or desirable.
The Survey is correct in emphasising Swadeshi as a strategy. The key lessons to learn from history is that the policy of import substitution, by and large, has not succeeded in India. The idea was thus to set the priorities right and redefine the policy of import substitution in the current context in the last decade through Make in India, Atmanirbhar Bharat, and the performance-linked incentive (PLI) scheme. A detailed discussion on the PLI shows that the 14 designated sectors have attracted Rs 2 lakh crore in investments and generated over 12 lakh jobs, apart from aiding export performance. Similarly, 10 projects in the semiconductor sector have attracted Rs 1.6 lakh crore in investment.
A major proposal is a National Input Cost Reduction Strategy that treats competitiveness as infrastructure, recognising affordable and reliable inputs.
Finally, the Survey highlights India’s leap towards social sector schemes starting from PM Jan Dhan accounts to Har Ghar Jal and PM SVANidhi, which have pushed the government’s social services expenditure to 7.9% of GDP in FY26 (BE). The new labour codes would simplify compliance, revise outdated provisions, and create a streamlined, effective framework that enhances ease of doing business while protecting workers’ rights and welfare.
In all, the Survey has straightforwardly highlighted the current baseline and the possible coordinates of future destinations. In FY27, at around 7% growth, India will remain the fastest-growing economy, but time is opportune to undertake major industrial reforms to achieve strategic resilience.