The Economic Survey 2025–26, tabled ahead of the Union Budget, highlights the resilience and sustained momentum of the Indian economy despite heightened global uncertainties fuelled by Tariff wars, US-India trade tensions and military conflicts across the world. Real GDP growth is estimated at 7.4% in FY26 and projected in the range of 6.8–7.2% in FY27, reaffirming India’s position as the fastest-growing major economy for the fourth consecutive year. Continued structural reforms have raised India’s potential growth rate to around 7%, up from approximately 6.5% three years ago.
Domestic demand remains the primary growth driver. Private consumption has grown by around 7% and accounts for over 61% of GDP, while investment activity remains robust with gross fixed capital formation rising nearly 8%. Overall investment has been sustained at about 30% of GDP, supported by strong public capital expenditure and a gradual revival in private sector capex.
Public investment and fiscal consolidation continue to anchor macroeconomic stability. The Centre’s effective capital expenditure has increased significantly, rising from a pre-pandemic average of 2.7% of GDP to around 4%, while states have maintained capital spending at approximately 2.4% of GDP. Revenue buoyancy has improved, with gross tax revenue at around 11.5% of GDP and a rising share of direct taxes, enabling a steady reduction in fiscal deficits. The government has reiterated its medium-term objective of reducing central government debt to around 50% of GDP by FY31, from 56.1% of GDP budgeted for FY26.
On the external front, India’s position remains comfortable. The current account deficit moderated to about 0.8% of GDP in H1 FY26, aided by strong services exports and stable remittance inflows. India also emerged as the world’s largest destination for greenfield digital investments, attracting USD 114 billion between 2020 and 2024, reflecting investor confidence in its macroeconomic stability and long-term growth prospects.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
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