The survey notes that India’s “strongest macroeconomic performance in decades” has collided with a global system that no longer rewards macroeconomic success with currency stability, capital inflows or strategic insulation, calling it the “paradox of 2025”.
Terming India as “a victim of geopolitics and a strategic power gap,” the survey said the country’s economic ambitions are confronting powerful global headwinds as the world’s dominant power is rethinking its economic and other commitments and priorities, throwing global trade into a welter of uncertainty and global frictions.
The survey, however, noted that these same forces could be turned into tailwinds if the State, the private sector and households are willing to align, adapt and commit to the scale of effort that the moment demands. “The task will be neither simple nor comfortable — but it is unavoidable.”
Resilient Macroeconomic Performance
The survey highlighted that despite the United States imposing 50% reciprocal tariffs, India has continued to post strong macroeconomic performance, with growth accelerating on the back of a series of structural reforms and policy measures. “Growth was strong in the first quarter and continued to improve in the subsequent two quarters.
The central bank cut interest rates aggressively and loosened liquidity conditions,” the survey said. “S&P’s upgrade of India from BBB- to BBB was India’s first credit rating upgrade from a major agency in nearly two decades,” it added.
The survey also outlined three possible global scenarios for 2026, beginning with a lingering concern that the negative effects of the ongoing global political and economic turmoil may manifest with a lag. This scenario is less about continuity and more about managed disorder, with countries operating in a world that remains integrated yet increasingly distrustful.
In the second scenario, the probability of a disorderly multipolar breakdown rises materially and can no longer be treated as a tail risk. Under this outcome, strategic rivalry intensifies.
Trade becomes increasingly coercive, sanctions and countermeasures proliferate, supply chains are realigned under political pressure, and financial stress events are transmitted across borders with fewer buffers and weaker institutional shock absorbers.
In such a world, policy becomes more nationalised, and countries face sharper trade-offs between autonomy, growth and stability.
The third scenario involves the risk of a systemic shock cascade in which financial, technological and geopolitical stresses amplify one another rather than unfolding independently.
While this remains a lower-probability scenario, the survey warned that its consequences would be significantly asymmetric, with macroeconomic outcomes potentially worse than those seen during the 2008 global financial crisis.
India’s Relative Advantage
Across all three scenarios, the Economic Survey argued that India is relatively better placed than most other countries due to its strong macroeconomic fundamentals, though this does not guarantee insulation.
“The country benefits from a large domestic market, a less financialised growth model, strong foreign exchange reserves and a credible degree of strategic autonomy,” it said. These features, according to the survey, provide buffers in an environment “where financial volatility is imminent and geopolitical uncertainty is permanent.”
The survey also noted that all the three scenarios pose a common risk for India: disruption to capital flows and the consequent impact on the rupee. It highlighted India’s dependence on foreign capital inflows to maintain a healthy balance of payments.
The Indian rupee underperformed in 2025, while India continues to run a trade deficit in goods, with net trade surpluses in services and remittances insufficient to offset it. “When they run drier, rupee stability becomes a casualty,” the survey added.