Growth optimism contingent on uptick in capital stock

It takes into consideration global uncertainties, though a stable output growth of 3.3% for 2025 and 2026, better than expected earlier, even as the balance of risks remained tilted to the downside.

Written by Guest

Updated: January 30, 2026 14:23 IST

Some positive developments in the current year have been enumerated. (Representational image: Canva)

By R Gopalan and MC Singhvi

The Economic Survey 2025-26 indicates the current economic outlook and medium-term prospects. Survey indicates optimism for Indian Economy with a sustained economic growth exceeding 7%. It takes into consideration global uncertainties, though a stable output growth of 3.3% for 2025 and 2026, better than expected earlier, even as the balance of risks remained tilted to the downside. Sectoral composition of growth for India, however, remain unaltered with manufacturing share stagnating at around 18% at constant prices, though in nominal terms it has moderated to 12.8%, as relative deflator for manufacturing has been low. The 7% growth is however contingent upon the growth of capital stock of 7.6% and a total factor productivity growth of 1.9%.

IIP up, pharma rebounds, PLI draws Rs 2 lakh crore, 12.6 lakh jobs

Some positive developments in the current year have been enumerated. GST reforms raises new demand expectations in output growth in high value manufacturing sectors. IIP data until December 2025 indicate that electronic and electrical equipments, basic metals and transport equipments have recorded a significantly higher growth. Pharma sector shows resurgence in the last two months. Production Linked Incentive (PLI) Schemes across 14 sectors have attracted over Rs. 2.0 lakh crore of actual investment, generating incremental production/sales exceeding Rs.18.7 lakh crore and over 12.6 lakh jobs as of September 2025. Our Global Innovation Index rank has improved to 38^th in 2025 from 66^th in 2019. Around 56.2 crore people (aged 15 years and above) were employed in Q2 FY26, reflecting a creation of around 8.7 lakh new jobs. The PLFS 2023-24 show that the share of individuals (in the 15–59 age group) having acquired some form of vocational or technical training has increased from 8.1% in 2017-18 to 34.7% in 2023-24, reflecting the positive impact of skilling initiatives in India. The Labour Codes were notified on 21 November 2025. Survey indicates that for strategic resilience in uncertain global environment, India’s approach to move beyond blanket import substitution toward a calibrated, three-tiered strategy that builds critical capabilities, reduces input costs, strengthens advanced manufacturing, and progresses from self-reliance to strategic indispensability is indeed futuristic. With all the above, can we achieve Viksit Bharat growth target for 2047, which may need more than 8% consistent growth?

Income growth needed to lift savings and demand

Sustained savings to reach investment levels seen in 1st decile of this century, which resulted in >8% growth, cannot be obtained by real incomes not going up. Normally household sector savings provide for corporates investment. It also provides resources for all round consumption. Such real income growth of 2000-10 is not evident now. Second, corporates are sitting on massive cash and are looking for demand to rise even though capacity utilization is good. They are also affected by global uncertainties for investment. The unincorporated sector, including MSMEs, suffer from inadequate capital to create growth for the bottom two quintiles. Collateral free and guaranteed capital is required to meet this objective. The survey does not address this concern. The survey however deals with MSMES productivity enhancement, and deepening competitiveness.